Table 1 : Investment Statistics (WCT; Code: 9679) Bloomberg: WCT MKNet FD NetFYE Turnover Profit# EPS# Growth PER EPS#C.EPSP/CF P/NTA ROE Gearing GDYDec (RMm) (RMm) (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)2009
4,666.6 147.1 18.8 43.5 16.6 - - 11.3 1.9 11.5 0.2 3.2
2,553.0 148.9 19.3 2.8 16.1 18.4 19.0 22.6 1.7 10.7 0.5 1.9
2,254.5 147.8 19.1 (0.8) 16.3 18.3 22.0 23.4 1.6 9.8 0.4 1.9
1,981.1 152.1 19.7 2.9 15.8 18.7 25.0 23.1 1.5 9.4 0.4 1.9
Main Market Listing /Trustee Stock/Syariah Approved Stock By The SC #Excluding EI * Consensus Based On IBES
key projects this year.
WCT has secured two key contracts,namely: (1) A QAR1.59bn (RM1.36bn) government administrative building job in Doha, Qatar; and (2) The Tuaran hospital project in Sabah worthRM127.8m. The latest contracts are the 3
key jobs WCT hassecured this year, boosting its YTD new contracts secured to RM2.1bn (seeTable 2) and its outstanding construction orderbook by 53% to RM4.3bn(see Table 3). Assuming an EBIT margin of 8-10%, the latest contracts willfetch RM119-149m EBIT over the construction period ending Apr/May 2013.While we are positive on the latest development, we expect limited reactionfrom the market as WCT had been hinting on the Qatar job for a while bynow.
We are raising FY12/10-12 net profit forecasts by 6-13%,having reflected RM2.1bn new contracts secured in FY12/10 vis-à-vis ourprevious assumption of RM1.5bn.
Risks to our view.
The risks include: (1) New contracts secured inFY12/11-12 coming in above our target of RM1.5bn per annum; and (2)Better-than-expected construction margins.
. We are upbeat on construction stocks as webelieve they will continue to generally outperform the market from 4Q2010,buoyed by news flow from: (1) The infrastructure development for theGreater KL National Key Economic Area (NKEA) under the EconomicTransformation Programme (ETP), particularly, the RM40bn MRT project;(2) The RM7bn Ampang and Kelana Jaya LRT line extension project; and (3)Federal land deals. WCT, via WCT – Synohydro JV, has been pre-qualifiedto bid as main contractor and segmental box girder sub-contractor for theAmpang and Kelana Jaya LRT line extension project. However, WCT’svaluations remain not compelling, despite an 11% upgrade in our indicativefair value from RM2.30 to RM2.56 based on 14x revised fully-dilutedFY12/11 EPS of 18.3sen, in line with our benchmark 1-year forward targetPER of 10-16x for the construction sector.