INVESTMENT HIGHLIGHTS

• 1QFY17 results discouraging

• Earnings stagnated

• Earnings forecast unvaried

• Nevertheless, we maintain our SELL recommendation with a TP of RM1.61 per share

1QFY17 results discouraging. WCT’s 1QFY17 earnings of RM33.0m (+843% YoY) fumbled slightly below ours and consensus’ expectations at 20.0% and 22.3% of full year estimates respectively adding up to stagnating revenue of RM473.3m (+4.0%YoY). The stagnating revenue is pillaged by lower billings recognition, unwavering admin expenses of RM18.1m (-6.0%YoY) or 31.2% of GP* and finance costs of RM12.2m (- 5.9%YoY) or 20.9% of 1QFY17’s GP.

Earnings stagnated. The stagnating revenue coupled with insipid margin means WCT could be sailing too close to the wind. Despite rising share price we are not sure on WCT’s direction whether to securitize its mall assets i.e. Paradigm PJ and JB, Aeon Bukit Tinggi and Gateway@KLIA2 or to sell its landbank worth RM1.4bn to pare down its total debt of RM4.6bn.

Earnings forecast unvaried. Despite its orderbook ascended to RM4.3b; we maintain our forecast that earnings will still be weak in upcoming quarters due longer project timeline such as Pan Borneo Highway and clarity of management’s direction. The management however could galvanize WCT’s core strength of construction and part with the property development division by securitizing it instead of opting for the REITs route.

Recommendation. Nonetheless, we maintain our SELL recommendation with SOP-based TP of RM1.61 per share.

Source: MIDF Research - 30 May 2017