WCT - Pushing ahead Buy

- Maintain BUY on WCT with an unchanged fair value of RM3.05/share, pegging the stock at a 15% discount to its sum-of-parts value. For 1QFY12, WCT posted a net profit of RM40mil on a turnover of RM342mil, with no dividend declared.

- We consider the results – representing 22%-23% of both consensus and our full-year forecast – to be in line on:- (i) a seasonally weaker 1Q; and (ii) maiden contributions from the Paradigm Mall from 2HFY12 onwards.

- Net profit expanded circa 7% YoY mainly on a pick-up in construction billings (+10% YoY) – for which circa 85% of construction revenue came from domestic billings. 

- WCT’s outstanding order book currently stands at approximately RM3.3bil, providing earnings visibility until 1Q 2015. Year-to-date, WCT has secured some RM631mil worth of new orders – already surpassing the RM187mil that the group had secured for the whole of FY11.

- The two new jobs are:- (i) KK Medical Centre & Riverson (RM331mil); and (ii) new MITI building in Putrajaya (RM300mil).

- The local press recently reported that WCT is gunning for RM1bil worth of new contracts in FY12F – roughly in line with our assumptions. This represents one-fifth of ~RM5bil worth of on-going tenders, with a 60:40 split between local and international jobs.

- While it recently missed out on the RM300mil Ampang line depot contract (won by Fajarbaru Builders), some of its near-term opportunities include:- (i) additional infrastructure packages for Vale’s iron ore facilities (RM100mil-RM200mil); (ii) station works for the Sg.BulohKajang MRT line (~RM200mil-RM300mil per package); (iii) two road packages for the Oman Expressways (~RM1bil/package); and (iv) the RM8bil Gemas-JB double tracking project.

- Property unit WCT Land is targeting RM700mil worth of new sales for FY12F, ahead of the record RM400mil++ it had achieved in FY11. New launches ahead include the 1Medini Residences in Johor, Bukit Jelutong and a new luxury development project in Klang.

- The upcoming Paradigm Mall (launching later today) and KLIA2 (1Q 2013) would double the NLA of its shopping mall to 2.1 mil sq ft. Broadly, such a move marks WCT’s quest to expand its recurring income base to 25% of group operating profits by FY16F from 15% in FY11.     

Source: AmeSecurities