WCT announced that its joint-venture with TSRCAP (51:49) had won a contract award from Merdeka 118, amounting to RM676.8m. BUY with a Target Price of RM1.10 implies FY19E PER of 10.5x. Supported by its improving order-book trajectory amid challenging times, we laud management for their iron will in performing a herculean task turning the company around especially for its property division. 

The scope of work for this contract includes the construction and completion of an 8-level shopping complex podium, including the architectural works for the basement, retail area, residential drop-off and core, tower link bridge and external works. Construction would commence from 2nd January 2019 and is expected to complete within 30 months. 

This would be the third contract bagged by WCT bringing its total effective replenishment for the year to c.RM2.7b. While its replenishment for the year has exceeded our assumption of RM2.0b for 2018, we are still neutral on the win as it adds to our replenishment assumption of RM1.5b for 2019, at 47%. 

Assuming pre-tax margin of 7% and based on its effective stake of 51 %, the project is expected to contribute c.RM7.0m to its bottom-line per annum. No changes to our FY18-19E earnings forecasts as the contract win forms part of our order-book replenishment assumption. 

Its outstanding order-book currently stands at c.RM7.3b after factoring in the contract providing earnings visibility for the next 2.5-3.0 years. As for its property division, clearance of its inventories of RM865.0m remains a top priority for its management team, and we believe that it would be a re-rating catalyst for the company should they are able to clear more than 50% of the inventories. 

Source: Rakuten Research - 24 Dec 2018