WCT - More to come from Vale 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. We expect WCT to be in line for more contracts from Vale following the latest award worth RM73mil from the Brazilian mining giant.

- The contract is for industrial civil works. Its scope includes piling works, foundation of conveyors, foundation of sampling towers, foundation of pipe & cable racks, pump house foundation & related works, storm water pond civil works and drainage work under Phase 1A at Vale’s new facility at Teluk Rubiah, Perak.  The entire project is to be completed in 18 months.   

- WCT’s latest win is a repeat job secured from Vale, following an earlier contract for earthworks (RM115mil) that was won by the group for the same project last year.

- Last October, a report by The Star report quoted Vale’s Executive Director Jose Carlos Martines as saying that the group will set aside a total of US$5bil (RM15bil) in investments over the next 10 years to develop a mega iron ore distribution centre at Teluk Rubiah.

- Phase 1 of the Teluk Rubiah facility alone would cost RM4bil. It comprises a 2.2km-long offshore jetty and regional distribution centre that can handle 30 millon tonnes by 1Q14 (or roughly half of China’s monthly iron ore imports). A warehouse would also be built to store its iron ore products.

- More importantly, this puts WCT in good stead to secure more contracts from Vale’s massive plant. The next inline could be additional earthworks worth between RM100mil and RM200mil.

- This contract brings WCT’s total new wins for FY12F to ~RM705mil, and already surpasses the RM187mil it secured for the whole of FY11. We make no changes to our earnings forecast as it already forms part of our new orderbook assumptions of RM1.2bil.   

- Apart from Vale, we gather that WCT is stepping-up its contract bids with ~RM5bil worth of on-going tenders (domestic/international: 60%:40%).

- The successful launch of Paradigm Mall - launched last month - and KLIA2 (target: 1Q 2013) is set to double the NLA of its shopping mall to 2.1 mil sq ft. Broadly, such a move marks the WCT’s quest to expand its recurring income base to 25% of group operating profits by FY16F from 15% in FY11.    

Source: AmeSecurities