WCT (FV RM3.10 - BUY) 1QFY12 Results Review: Decent Start of 2012

WCT’s 1QFY12 earnings of RM40.0m (+7.1% y-o-y; -16.5% q-o-q) were within our expectations and consensus at 21.2% and 21.9% of the annual forecasts respectively. Management said it is bidding for RM5bn worth of jobs and maintain its FY12 property sales  target  of RM700m.  Nonetheless,  we are taking a more conservative stance by factoring in weaker orderbook replenishment as we head into 2HFY12 and the 13^th General Election approaches. Maintain BUY, at a revised FV of RM3.10, based on an unchanged 14x FY12 PER.

Decent quarter. WCT posted 1QFY12 revenue of RM341.6m (+8.2% y-o-y; -29.6% q-oq) and core earnings of RM40.0m (+7.1% y-o-y, -16.5% q-o-q). Compared with 1QFY11, EBIT  margin  thinned by  some 250bps due to lower construction margins recognized during the quarter. Net margin, however, only dipped by a marginal 10bps y-o-y, helped by lower financing expenses as well as improved contribution from its associates.  The 1QFY12 numbers were generally weaker q-o-q due to the shorter working days.

Potential jobs from Middle East. Management  guided that it  has tendered for some RM5bn worth of jobs that may  potentially be awarded in 2H12.  A few of the bigger projects that the group is looking to secure include a RM2bn highway job in Oman, RM1bn foundation works for the Kuala Lumpur International Financial District, as well as a RM800m-RM900m building job in Klang Valley. The group has secured  RM631m worth of new jobs YTD. With the 13^th General Election rumored to take place as early as June this year, we are taking a more conservative stance by factoring in lower orderbook replenishment as we head into 2HFY12. We are now targeting for RM1.5bn worth of new jobs for both FY12 and FY13 versus RM2.0bn previously.

Property division continues to excel. WCT intends to launch new properties worth a total GDV of RM1bn this year, with a target take-up rate of 70%. We understand that YTD sales have been fairly encouraging, with about RM300m  of  property sales registered in 1QFY12 alone. That said, we are tweaking our FY12 property sales target from RM400m previously  to RM600m but lower our margin assumption by 200bps to account for the less optimistic sentiment in local property market. Meanwhile, its FY13 sales forecast is left unchanged at RM400m for now.

BUY. All in, our earnings forecasts are lowered by a marginal 2.3% for FY12 and 4.5% for FY13. Nonetheless, we still like the company’s three-pronged approach to expand its property development, investment and management activities. Note that the group will be launching its Paradigm Mall later today, with an initial occupancy rate of over 90%. Maintain BUY, at a revised FV of RM3.10, based on an unchanged 14x FY12 PER.

Source: OSK