WCT (WCT MK, BUY, FV: RM3.17, Last Closing: RM2.65)

In conjunction with its 4QFY11 results release, WCT has indicated its intention to secure a number of contracts including one worth RM400m relating to Vale’s distribution centre in Teluk Rubiah, 2 buildings in Putrajaya worth RM1bn,  and a hospital in the Iskandar region. Elsewhere,  RM1bn worth of properties will  be launched this year, with its Paradigm Mall  expected to bring in rental income by 2Q12.  We like  its three-pronged approach to expand its property development, investment and management activities by leveraging on its engineering and construction expertise. Maintain BUY, at a revised FV of RM3.17, based on 14x FY12 PER and an enlarged share base, following its ESOS and warrants exercise.

RM2.7bn-strong orderbook. WCT’s orderbook currently stands at a sturdy RM2.7bn, with the bulk (>40%) comprising works on the Qatari Government Administrative Office. As the group has secured RM631m worth of jobs YTD, we peg our FY12 and FY13 replenishment at RM2bn p.a. We believe these targets are achievable since management is aggressively converting its existing LOIs relating to the construction of a RM2.8bn dam in Kota Kinabalu and a RM200m hospital in Sabah. On top of that, we also understand that the group is eyeing RM400m worth of jobs in Teluk Rubiah from Vale as well as potentially bagging two government buildings in Putrajaya totaling RM1bn, and a private hospital in the Iskandar region. 

  

Targeting projects worth RM1bn GDV in 2012. As of Dec 2011, WCT was sitting on unbilled sales of RM357m. For FY12, the group is targeting to launch new projects worth a total of RM1bn in GDV, mainly comprising luxury homes near its existing Bandar Parklands development, serviced apartments at its Paradigm project in Kelana Jaya as well as Phase 2 of its 1Medini project in the Iskandar region. We are now modeling for relatively more modest property sales of RM400m p.a. for both FY12 and FY13, up from our earlier assumption for RM350m p.a.

Paradigm  Mall the third self-run commercial play. WCT currently operates two commercial properties  – the  BBT Shopping Mall (in which AEON Jusco is the sole tenant)  and the  Premiere Hotel in Klang, launched in 4QFY10. On the back of these properties, its property investment arm chalked up a decent revenue of RM52.3m in FY11 at an appealing gross margin of >70%. For FY12, we expect growth to stem from the maiden contribution  from its 700k sq ft Paradigm Mall, targeted for launch in 2QFY12. The 70%-owned development (30% held by EPF), comprising office towers, a shopping mall and serviced apartments, is strategically located near the Kelana Jaya LRT station along the LDP highway.

Source: OSK188