We maintain our SELL call, FY13-14 forecasts and MYR2.30 FV following the release of 2QFY13 results, which came in within expectations. WCT is not an ideal proxy to infrastructure spending in Malaysia, as it has yet to  secure  any  work  packages  from  the  Klang  Valley  MRT  project.  In addition, we believe its share price upside is exhausted, after the run-up post the 13th general election.

- Within  expectations.  WCT’s  1HFY13  core  net  profit  of  MYR88.1m (excluding a MYR5.5m disposal loss and a MYR17.3m forex gain) came in  broadly  within  expectations  at  44-52%  of  our  full-year  forecast  and consensus estimate. This was boosted by MYR20m variation order (VO) claims  approved  “from  a  local  project”,  which  largely  offset  the MYR26.3m  payable  to  former  subcontractor  Bahrain  Asphalt Establishment  for  the  Dukhan  Highway  project,  in  accordance  with  the verdict of a contract dispute tribunal.   

- Eagerly  awaiting  bid  outcome  of  Kwasa  Damansara  and Sabah hospital. During the last analysts’ briefing in May 2013, WCT said that it was  eagerly  awaiting  the  outcome  of  its  bids  for  Kwasa  Damansara infrastructure  work  as  well  as  a  privatised  hospital  project  in  Sabah, having  already  secured  two  key  construction  jobs  worth  a  total  of MYR511m thus far this year. 

- Raising FY13 property sales target to MYR775m. WCT raises its FY13 property  sales  target  slightly  to  MYR775m  (from  MYR700m),  backed  by MYR877m  new  launches  from:  (i)  Medini,  Iskandar  (MYR400m),  (ii)  the Klang  area,  ie  Bukit  Tinggi  2,  Bandar  Parklands  and  Laman  Greenville (MYR357m), and (iii) Bukit Jelutong, Shah Alam (MYR120m).  As at end-1QFY13, WCT’s unbilled property sales stood at MYR496m.

- Maintain  SELL.  The  construction  sector’s  fundamentals  are  strong, backed  by  the  ongoing  and  shovel-ready  mega  infrastructure,  property and  oil  &  gas  projects.  Our  MYR2.30  FV  is  based  on  16x  fully-diluted FY14  EPS  of  14.3sen,  in  line  with  our  benchmark  1-year  forward  target P/E of 10-16x for the construction sector. We anticipate more information at this morning’s analysts’ briefing. 
 

Source: RHB