WCT Holdings (WCT) registered a net profit of RM40.8m (+89.7% QoQ, +70.2% YoY) in 3QFY17 which was a tad above our expectations but below consensus. YTD, the Group’s net profit came in at RM95.3m (+47% YoY), which constituted 81% and 65% of our and consensus full year estimates. Construction earnings came in stronger than expected. As such, we adjust our margin assumption for FY17, resulting in earnings raised by c.10%. All told, we have lowered our TP for the stock from RM2.00 to RM1.80 however, after accounting for recent share placement exercise (assuming indicative share placement price of RM1.73) and changes to market value of its property assets. Maintain Neutral.

• Better showing from construction. Again, the key profit contributor is the engineering and construction division which delivered RM99.6m (+191% YoY) or c.58% of total operating profit. As expected, property division continued to be weak, with operating profit dropping c.25% to RM48.0m. Property investment was steady with its operating profit rising 16% YoY to RM24.1m.

• Healthy order book. The Group has secured c.RM1.8bn worth of new jobs YTD, which we estimate has increased its outstanding orderbook to c.RM6bn as at August. We understand it has submitted tenders worth more than RM6bn and we believe it should be on track to meet its replenishment target of RM2bn annually. Going forward, new construction-related jobs eyed include the Pan Borneo Sabah highway, LRT3 (other packages) and works in Kwasa Damansara and Tun Razak Exchange (TRX). As for property, sales target for FY17 is RM500m. The new sales are expected mainly from its unsold inventories which is said to have GDV of over RM1bn. Margins, however, are expected to be lower due to its re-pricing strategy to make its properties more competitive in the soft market currently.

Source: PublicInvest Research - 23 Nov 2017