News WCT
announced that its 80:20 JV company with Oman Roads Engineering Company LLC has
secured a contract from Sultanate of Oman for the construction and completion
of Batinah Expressway (Package 2) stretching about 44.8KM with a contract sum
of RM1.0b. The project is slated for completion in 36 months.
Comments We
view this news as a surprise as we expected any additional contract wins will
only come in closer towards end-FY12.
With this new
contract award, WCT has already secured approximately RM2.0b worth of contracts
YTD, which has exceeded our RM1.0b order book replenishment assumption for
2012. However, we see the contribution to FY12 operating profit to be minimal
initially at c.3% due to the “S” curve trend for construction works and revenue
recognition.
The group’s current
order book stands at RM3.6b (external), which could last it for the next 3
years.
Outlook We believe that there will be more local
projects to be awarded closer to end-2012, i.e. Petronas RAPID and TRX
earthworks with a combine contract value at c.RM2.5b. We have factored in a
RM1.0b order book replenishment in our FY13 forecast.
2013 will be an
exciting year for WCT riding on its sizeable outstanding order book of RM3.6b
(external) and the additional recurring income from its upcoming Gateway@KLIA2
by 2Q13.
Forecast We have revised our FY13 earnings higher by 9%
as we expect the contribution from Oman Highway will only materially impact its
earnings from FY13 onwards.
Rating Maintain
OUTPERFORM
We are maintaining
our OUTPERFORM recommendation for WCT due to the attractive upside (+60%) from
the current price.
Valuation There
is no material revision in our Target Price of RM3.93, which is based on SOP
valuation.
Risks Further delays in ETP based projects.
Source: Kenanga
No comments:
Post a Comment