Secures PLUS Expressway Expansion Contract Worth RM249.7mn

WCT has accepted a letter of award for a contract valued at RM249.7mn from Projek Lebuhraya Usahasama Bhd (PLUS) to expand lanes on the PLUS NorthSouth Expressway. This project involves constructing additional lanes from Yong Peng (north) to Senai (north) and includes the site clearance, demolition, earthworks, drainage, pavement, road markings, road furniture, geotechnical work, bridge structures, environmental protection works, utility relocation, road lighting systems, and the extension of vehicular box culverts.

This project will commence on 28 June 2024 and is estimated to be completed within 36 months.

Our View

This marks the first construction job bagged by WCT in this year, bringing the total outstanding order book to RM2.7bn, translating into 2.4x FY23 construction revenue.

Assuming a PBT margin of 5%, we estimate this project to contribute a net profit of approximately RM9.5mn throughout the construction period.

Forecast

We maintain our FY24-26F earnings forecasts as the new job falls within our FY24 order book replenishment assumption of RM1.0bn.

Valuation

Considering WCT as a strong contender for upcoming mega-infrastructure projects, including the Penang International Airport Expansion, Penang LRT, and Subang Airport Regeneration Plan, we adjust our target PER from 12x to 18x against the CY25 earnings. The current tender book stands in excess of RM20bn. This revised valuation represents a 20% premium to GADANG’s target PER of 15x, acknowledging WCT’s proven track record in aviation facility construction and mega-scale infrastructure projects. We raise our target price from RM0.56 to RM0.83. Upgrade the stock to Hold from Sell previously.

Source: TA Research - 21 Jun 2024