WCT Berhad - Secures PLUS 4th lane widening contractitle

News   WCT announced that it had secured a contract from UEM-MRCB JV Sdn Bhd (formerly known as Intria Urus Sdn Bhd) worth RM391m. The scope of work includes the clearing and earthworks for highway lane widening of the existing 3-lane North-South Expressway (NSE) from Nilai to Seremban (stretching about 22km)

Comments

We take this news as a pleasant surprise. Management had earlier indicated that there are more projects in the pipeline to be awarded in the near term, which would include two packages of the PLUS 4th lane widening project. The other package of work is expected to be out in the near term and we understand that WCT has also tendered for the contract.

With this new contract award, for the YTD, WCT has already secured c.RM1.1b worth of contract in FY12. Most importantly, its order book replenishment for FY12 has slightly exceeded our assumption of RM1.0b.

Its current order book stands at RM2.7b, which could last it for the next 2 years.

Outlook

We see WCT’s chances of securing another package for the 4th lane widening project above as slim at this juncture. However, there are at least another two projects that WCT is closely eyeing at this juncture, Oman Highway and KLFID. These two projects could be worth more than RM2.0b.

Its Integrated Complex is already 72% completed and it is scheduled for the official opening in April 2013. Due to competitive rental rates, WCT expects the IC will be able to turn in a profit in its first year of operation (6 months).

Forecast   There are no major changes to our forecast as the contract value is within our expectation. We expect further revision on WCT’s Target Price should it secure more than RM100m in contract works value for the remaining six months in FY12.

Rating   Maintain OUTPERFORM

We are maintaining our OUTPERFORM recommendation for WCT with its attractive upside (+60%) to our Target Price from the current share price.

Valuation            There is no change in our Target Price of RM3.92, which is based on SOP valuation.

Risks      Further delays in ETP and Middle East based projects.

Source: Kenanga