WCT Bhd - Stepping up the plate BUY

Maintain BUY on WCT with a slight increase in our fair value to RM3.05/share (previously: RM3.00/share) – pegging the stock at an unchanged 15% discount to its sum-of-parts value as we roll forward our valuation base to FY12F. 

• WCT reported FY11 results which were largely in line with expectations, coming in at between 2%-4% higher than both the street and our estimates.

• FY11 net profit rose 8% YoY to RM162mil. This was largely aided by a pick-up in progress for some of its on-going projects and higher recognition from its growing property investment portfolio.   

• On a sequential basis, construction earnings gained 49% QoQ on a step-up in progress for on-going projects. 

• WCT’s order book trajectory is fast-improving. The RM300mil Kota Kinabalu medical facility contract announced two days ago brings total new job wins to ~RM630mil within just two months into FY12F, and already surpasses the RM187mil secured for the whole of 2011. 

• WCT’s current tender book stands at RM4bil-RM5bil vs. outstanding orders of ~RM3bil+. About RM3bil of the tender book involves the Middle East (including the Oman expressway projects), with the balance comprising various local jobs.

• Key domestic bids include: (i) sub-contracting works for the West Coast Expressway; (ii) station works for the Sg.BulohKajang MRT line; (iii) infrastructure opportunities within Iskandar Johor; (iv) Vale iron ore facility; (v) additional works at KLIA2; (vi) Langat 2; (vii) KL International Financial District (KLIFD); (viii) Gemas-JB double tracking; (viii) Penang Traffic Alleviation plan; and (ix) building jobs within the KL City Centre. WCT’s new property sales reached a record of RM400mil+ in FY11. Moving into this year, we gather that planned launches could be raised to ~RM1bil with a pre-sales target  of ~RM700mil. Apart from its flagship Bandar Bukit Tinggi development, new launches would come from Medini Iskandar, Bukit Jelutong and Paradigm office suites.    

• Despite the +13% increase in its share price ytd, WCT’s valuations are still compelling at FY12F-13F PEs of 11x-13x, still below its historical peak of 15x. Further valuation upside would come from future recurring income from the KLIA2 integrated complex – due by year-end (not included in our forecast yet).    

Source: AmeSecurities