We upgrade our call to NEUTRAL (from Sell) as valuations have become less demanding after the recent share price correction. We maintain our FY13-14 forecasts and MYR2.30 FV as WCT reiterated positive guidance on  new  construction  job  wins  and  property  sales  during  its  analysts’ briefing  last  Friday.  The  group  is  also  in  the  running  for  a  road  job  in Qatar and a Putrajaya building job worth MYR1bn each.   

- In  the  running  for  Qatari  and  Putrajaya  jobs.  WCT  reiterated  its guidance for MYR1.5bn of new construction contract wins for FY13. As it has  YTD  only  secured  jobs  worth  a  total  of  MYR511m,  this  implies contract  wins  totalling  about  MYR1bn  over  the  next  four  months.  WCT believes this is achievable, given that: i) it has emerged one of the three finalists for a road/bridge job in Qatar worth about MYR1bn, and ii) it is in the running for a “building cluster” job in Putrajaya known as Parcel  F, also worth about MYR1bn.   

- Could exceed FY13 property sales target of MYR775m. WCT believes it  stands  a  good  chance  of  exceeding  its  FY13  property  sales  target  of MYR775m, backed by MYR877m of new launches coming from: i) Medini in  Iskandar  Malaysia  (MYR400m);  ii)  the  Klang  area,  ie  Bukit  Tinggi  2, Bandar  Parklands  and  Laman  Greenville  (MYR357m);  and  iii)  Bukit Jelutong, Shah Alam (MYR120m). 

- Goodbye,  Vietnam.  Given  the  weak  prospects,  WCT  will  no  longer actively  pursue  property  projects  in  Vietnam.  The  group  revealed  that  it had,  in  its  2QFY13  results,  charged  out  about  MYR7m  in  preliminary expenses incurred with regard to potential ventures in Vietnam.

- Upgrade to NEUTRAL from Sell. The fundamentals of the construction sector  are  strongly  backed  by  on-going  and  shovel-ready  mega infrastructure, property and oil & gas projects. While WCT is not the best proxy  to  infrastructure spending  in  Malaysia, as  it has  yet  to  secure  any work  packages  from  the  Klang  Valley  MRT  project,  its  valuations  have become  less  demanding  after  a  9%  share  price  decline  since  we  downgraded the stock to Sell (from Neutral) on 23 May. No change to our MYR2.30 FV, which is based on a 16.0x fully-diluted FY14F EPS of 14.3 sen,  in  line  with  our  benchmark  1-year  forward  target  P/E  of  10.0-16.0x for the construction sector.

Source: RHB