Stellar construction job wins

Including the latest MYR323m win, WCT’s 2015 job win has outperformed expectations and the momentum could persist into 2016. Despite the challenging prospect of its property development business, its solid MYR4.4b outstanding construction orderbook, equivalent to 3.7x of its trailing construction revenue, would drive earnings growth. Meanwhile, continuous monetization of its assets and group earnings recovery would re-rate this undervalued stock. We revise our earnings forecasts, deriving a new MYR2.30 TP (+4.5%). Maintain BUY.

Clinched MYR323m job at RAPID

WCT has clinched another contract from PETRONAS for procurement, construction and commissioning of civil and infrastructure works at the utilities’ storm drain central area, and interconnecting and offsites facilities in RAPID, Pengerang worth MYR323m. The job scope covers demolition and restoration works, excavation and backfilling, storm drainage works, piling works, roads & paving works, underground piping works, concrete works, structural works, electrical and instrumentation works. The total works are expected to complete in 28 months by 3Q18. 2015 total job wins of MYR3.35b at a 10-year high This job win has raised WCT’s outstanding orderbook (from external parties) by 8% to MYR4.42b. Assuming a pretax profit margin of 5%, we forecast a net profit contribution of MYR12.3m (1.0sen EPS) into 2018.

Adjusting earnings forecasts

We raise our 2015 net profit forecast by 8% after imputing the higherthan- expected construction margins. Our 2016/17 net profit forecasts are largely unchanged (-1.8%/-1.5%) after we impute actual job wins in 2015 and raise 2016 and 2017 job win forecasts by 25% to MYR1b p.a. as these are offset by 39-42% lower 2015-17 property sales forecasts at MYR350m/400m/450m. Subsequently, our SOP-based TP is nudged up to MYR2.30 (+4.5%). Maintain BUY for its undemanding valuations.

Source: Maybank Research - 16 Dec 2015