21 October 2010

PP 7767/09/2011(028730)
Malaysia
RHB Research
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

N ew s Updat e
MARKET DATELINE 21 October 2010

WCT Share Price

Fair Value
:
:
RM3.11
RM2.56
Secures RM1.36bn Building Job In Qatar And Recom : Underperform
(Maintained)
RM128m Hospital Project In Sabah

Table 1 : Investment Statistics (WCT; Code: 9679) Bloomberg: WCT MK

Net FD Net
FYE Turnover Profit# EPS# Growth PER EPS# C.EPS P/CF P/NTA ROE Gearing GDY
Dec (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
2010f 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
2011f 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
2012f 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

♦ 3 th and 4th key projects this year. WCT has secured two key contracts, Issued Capital (m shares) 784.3
namely: (1) A QAR1.59bn (RM1.36bn) government administrative building Market Cap(RMm) 2,439.3
job in Doha, Qatar; and (2) The Tuaran hospital project in Sabah worth Daily Trading Vol (m shs) 1.9
52wk Price Range (RM) 2.41-3.20
RM127.8m. The latest contracts are the 3rd and 4th key jobs WCT has
Major Shareholders: (%)
secured this year, boosting its YTD new contracts secured to RM2.1bn (see
EPF 21.4
Table 2) and its outstanding construction orderbook by 53% to RM4.3bn
Taing KH & Wong SW 20.6
(see Table 3). Assuming an EBIT margin of 8-10%, the latest contracts will KWAP 7.1
fetch RM119-149m EBIT over the construction period ending Apr/May 2013.
While we are positive on the latest development, we expect limited reaction FYE Dec FY10 FY11 FY12
from the market as WCT had been hinting on the Qatar job for a while by EPS Revision (%) +6 +13 +13
Var to Cons (%) +1 -13 -21
now.

♦ Forecasts. We are raising FY12/10-12 net profit forecasts by 6-13%,

PE Band Chart

having reflected RM2.1bn new contracts secured in FY12/10 vis-à-vis our

PER = 19x
previous assumption of RM1.5bn. PER = 15x
PER = 11x
♦ Risks to our view. The risks include: (1) New contracts secured in PER = 7x

FY12/11-12 coming in above our target of RM1.5bn per annum; and (2)
Better-than-expected construction margins.

♦ Maintain Underperform. We are upbeat on construction stocks as we

believe they will continue to generally outperform the market from 4Q2010, Relative Performance To FBM KLCI
buoyed by news flow from: (1) The infrastructure development for the
Greater KL National Key Economic Area (NKEA) under the Economic WCT
Transformation Programme (ETP), particularly, the RM40bn MRT project;
(2) The RM7bn Ampang and Kelana Jaya LRT line extension project; and (3)
FBM KLCI
Federal land deals. WCT, via WCT – Synohydro JV, has been pre-qualified
to bid as main contractor and segmental box girder sub-contractor for the
Ampang and Kelana Jaya LRT line extension project. However, WCT’s
valuations remain not compelling, despite an 11% upgrade in our indicative
fair value from RM2.30 to RM2.56 based on 14x revised fully-diluted
FY12/11 EPS of 18.3sen, in line with our benchmark 1-year forward target
PER of 10-16x for the construction sector. Joshua CY Ng
(603) 92802151
joshuang@rhb.com.my

Please read important disclosures at the end of this report.

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 21 October 2010

Table 2: New Contracts Secured So Far In FY12/10

Project Value
(RMm)
Hotel fit-out works at Bahrain City Centre (additional work) 110
Integrated Complex, KLIA2 486
Government administrative building, Doha, Qatar 1,360
Tuaran Hospital, Sabah 128
Total 2,084
Source: Company, RHBRI

Table 3: Outstanding Construction Orderbook

Project Outstanding Value
(RMm)
Overseas
Government administrative building, Doha, Qatar 1,360
New Doha International Airport, Qatar 173
Hotel fit-out works at Bahrain City Centre 238
Others 23
1,794
Local
The Paradigm and other internal jobs 668
Integrated Complex, KLIA2 486
Infrastructure works at Iskandar Malaysia 481
Various building jobs in Putrajaya 252
New permanent LCCT at KLIA, Earthwork Package 1 203
Tuaran Hospital, Sabah 128
Bakun dam access roads 80
Kota Kinabalu International Airport 36
Universiti Teknologi Mara Campus in Kuala Selangor 36
AEON mall in Melaka 28
Others 89
2,487
Total 4,281
Source: Company, RHBRI

Table 4: Earnings Forecasts Table 5: Forecast Assumptions

FYE Dec (RMm) FY09a FY10F FY11F FY12F FYE Dec FY10F FY11F FY12F

Turnover 4,666.6 2,553.0 2,254.5 1,981.1 Construction EBIT margin (%) 6.2 6.9 8.0
Turnover growth (%) New orderbook secured 2.1 1.5 1.5
25.7 -45.3 -11.7 -12.1 (RMbn)

EBITDA 254.1 223.8 219.7 220.7

EBITDA margin (%) 5.4 8.8 9.7 11.1

Depreciation -10.0 -10.0 -10.0 -10.0

Net Interest -50.3 -42.3 -39.7 -37.0
Associates 17.2 10.0 10.0 10.0
EI 0.0 0.0 0.0 0.0

Pretax Profit 211.1 181.5 180.0 183.6

Tax 4.8 -32.6 -32.2 -31.6
PAT 215.9 148.9 147.8 152.1
Minorities -68.8 0.0 0.0 0.0
Net Profit 147.1 148.9 147.8 152.1
Source: Company data, RHBRI estimates

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