We  maintain our NEUTRAL call, forecasts and FV of MYR2.23  on WCT. Its  1Q14  results  met  our  forecast  but  missed  consensus  estimates. WCT  is  not  a  good  proxy  to  the  buoyant  construction  sector  in Malaysia,  as  it  has  yet  to  secure  any  work  packages  from  the  Klang Valley MRT project.  Also, its property business is facing headwinds on the back of the various sector cooling measures.

• Within our expectations, but misses consensus. 1Q14 core net profit of  MYR46.3m  (excluding  forex  loss)  came  in  at  33%/24%  of our/consensus  full-year  estimates.  We  consider  the  results  within  our forecast but below market expectations ,  as we expect weaker quarters ahead. This would be due to: i)  WCT’s  disappointing  FY13  construction contract wins  of only MYR670m  (vis-à-vis its target of MYR2bn)  and its inability  to  win  any  construction  job  as  yet  in  FY14 ,  ii)  its  equally disappointing  FY13  property  sales  of  MYR499m  (vis-à-vis  its  target ofMYR775m), and iii) the company’s expected share of initial losses from the  newly  opened  (and  70%-owned)  Gateway@KLIA2  shopping  mall, which we project at MYR5m in FY14 before it breaks even in FY15.
• Forecasts. Maintained.
• Risks to our view. These include: i) new construction contracts secured by  WCT  in  FY14-15  falling  short  of  our  MYR1.5bn  per  annumassumption, ii) higher-than-expected input costs, and iii) weak demand for its property launches.
• Maintain  NEUTRAL.  The  prospects  for  the  construction  sector  are strong, underpinned by the MYR73bn Klang Valley MRT project,  which will keep industry  players busy until 2019. However, WCT is not a good proxy  to  the  construction  sector,  as  it  has  yet  to  secure  any  work packages  from  the  MRT  project.  In  addition,  its  property  business  is facing  headwinds  on  the  back  of  the  various  sector  cooling  measures introduced by the Government.  Our  FV is  kept unchanged at  MYR2.23, which is  based on 16x fully-diluted FY15F  EPS of 13.9 sen, in line with our benchmark 1-year forward target P/Es  of 10-16x for the construction sector. 

Source: RHB