WCT announced that they have received a letter of award of construction works for Pavilion Damansara Heights worth RM1.8b. Backed by improving outlook we have a BUY on the company with an unchanged Target Price of RM1.35 implying FY19E PER of 14.3x, below its 5-year average of 18.7x. 

WCT accepted a letter of award from Impian Ekspresi Sdn Bhd (IESB) for the construction and completion of 9 blocks of office tower and 3 blocks of service apartment on a podium block comprising of retail space, mezzanine floors and works to lower ground floor and basement car park (for Pavilion Damansara Heights) for a contract sum of approximately RM1.8b over 38 months. 

This would be the second contract bagged by WCT, and we are positive with the contract award which would bring its year-to-date replenishment up to RM2.3b exceeding our target of RM2.0b by 16%. To recap, the first contract secured by WCT is the construction of a commercial complex, with an indicative value of RM555.0m based on a letter of intent from Lendlease. Currently, they are still waiting for a letter of award for that particular project as the project costs have yet to be finalised. Assuming pre-tax margin of 10%, the project would contribute c.RM42.0m per annum to its bottom-line. 

This latest contract win boosts its outstanding order-book to c.RM7.1 b (previously, RM5.3b) providing earnings visibility for the next 2.5-3.0 years. As for its property division, its unbilled sales stands at RM161.0m with less than 1-year visibility and the management team intend to continue with its re-pricing strategy to clear existing inventories amounting to GDV of RM603.0m. 

Source: Rakuten Research - 19 Sept 2018