WCT has secured a MYR1.2bn job in Lusail, Qatar. While the latest news is positive, it is not signiicant enough to change our view on WCT.  We maintain  our  SELL  call,  earnings  forecasts  and  TP  of  MYR1.40  (14% downside). WCT has yet to secure any work packages from the Klang Valley  mass rapid transit (MRT)  project.  Also, its property business is facing headwinds amid various cooling measures.

A  new  job  in  Qatar.  WCT,  via  a  70:30  joint  venture  with  private company  Al-Ali  Project  Co,  has  secured  a  QAR1.22bn  (MYR1.21bn)contract for  the construction of  various roads, utilities and  underground carparks in Lusail, Qatar (Lusail, a new planned city 15km north of Doha, will be the site of  the  iconic main  2022 FIFA World Cup Lusail Stadium).This is the first key job CT has secured in FY15, boosting its orderbook to MYR4.3bn  (see Figure 1). Assuming an EBIT margin of  8%, the job will earn MYR96.8m  in  EBIT  during a  construction period ending 2Q17.While we are positive on the latest news, we are mindful of the inherently high execution risk of overseas jobs in general.   

Forecasts.  We  maintain  our  forecasts  that  assume  WCT  to  secure MYR1.5bn worth of new jobs in FY15.

Risks  to  our  view:  i)  job  wins  in  FY15F-17F  falling  short  of  our MYR1.5bn per annum assumption, ii) higher-than-expected input costs, and iii) weak demand for its launched properties.

Maintain  SELL.  The  prospects  for  the  construction  sector  are  strong, underpinned by the MYR73bn Klang Valley MRT project, which should keep  industry  players  busy  until  2021.  However,  WCT  is  not  an  ideal proxy  as  it  has  yet  to  secure  a  Klang  Valley  MRT  job.  Its  property business is facing headwinds amid various sector cooling measures. We believe  that  it  is  still  difficult  for  the  market  to  put  a  positive  spin  on WCT’s  Middle  East  exposure  given  the  sustained  low  crude  oil  pricesthat have a negative bearing on oil wealth – and by extension, the ability of certain oil-exporting countries  in the Middle East  to continue  spendingon  lavish  projects.  We keep our TP at MYR1.40,  based on  a  12x fullydiluted FY15F EPS of 11.7sen, in line with our benchmark sector 1-year forward target P/Es of 10x-16x.  At the current price, the stock is trading at 14x FY15F P/E  (fully-diluted),  which we deem rich in the absence of any significant near-term re-rating catalyst.

Source: RHB