Yesterday, WCT announced that they have bagged its third LRT3 job, i.e. Package GS02 amounting to RM640.0m with a completion timeline of 35 months. We are neutral on the job win as it is still within our FY17E order-book replenishment assumptions of RM2.0b. No changes to FY17-18E earnings. Maintain MARKET PERFORM with an unchanged SoP- driven Target Price of RM1.83.

Hat-trick! This contract award of RM640.0m marks the third LRT3 job secured to-date by WCT, and we observed that WCT is one of the very few contractors who has secured multiple packages from LRT3. Previously, WCT won two packages, i.e. Package TD1 (RM185.9m) and Package GS03 (RM840.0m). This particular package GS02 is another guide way package similar to GS03 whereby WCT is required to complete the construction of guide way, stations, park and ride, ancillary buildings and other associated works from Bandar Utama to Johan Setia within 35 months.

Neutral on win… While it is commendable that WCT is able to bag multiple contract awards from LRT3 alone amounting to c.RM1.7b, we are neutral on the recent win of RM640.0m as it has no impact to our FY17-18E earnings given that it is still within our order-book replenishment assumptions of RM2.0b for FY17. Post win, we have a remaining order-book replenishment assumption of RM360.0m for FY17. Assuming pre-tax margins of 8%, this particular win will contribute RM13.2m to its bottom-line per annum.

Outlook. Its outstanding order-book is raised to c.RM6.0b from c.RM5.4b after the above contract award, providing earnings visibility for the next 2.5-3.0 years. As for its property division, its unbilled sales stands at RM487.0m with 1.5 years visibility and management intend to continue with their re-pricing strategy to clear its existing inventories amounting to GDV of RM644.0m.

Maintain MARKET PERFORM with an unchanged SoP-driven Target Price of RM1.83 in view of its steady earnings performance coupled with a lighter balance sheet and improving prospects. Share price has also retreated by 22% from the peak. Our TP implies FY18E PER of 18.5x in line with the big boys’ range of 18.0-20.0x, which we are comfortable with especially for concession owners.

Source: Kenanga Research - 06 Oct 2017