WCT - Nosing ahead in RM700mil Sabah Unimas job Buy

- Maintain BUY on WCT with an unchanged fair value of RM3.05/share/share – pegged to a 15% discount to its  sum-of-parts value.

- Business Times  revealed that WCT is primed as a frontrunner for a RM700mil contract to build a teaching hospital at Universiti Malaysia Sabah (UMS).

- The project is under the purview of the Highway Education Ministry.

- We  understand that the teaching hospital has been accorded a top priority in Sabah. Currently, students at UMS’ medical faculty have been utilising the Queen Elizabeth Hospital as a reference and research centre.

- The Business Times report added that WCT was among four parties that had earlier been pre-qualified for the project. A firm decision could be made within the next couple of weeks.

- We gather that bids could involve proposals under the Private Finance Initiative (PFI) scheme.

- Although not entirely surprised, we remain upbeat that this latest bid re-affirms our earlier view of WCT’s order book resurgence.

- Year-to-date, WCT has had enjoyed reasonably good success in its contract replenishment with RM2.1bil worth of jobs secured. The latest was the RM1bil BatinhahExpressway project in Oman (package 2) secured last month.

- WCT is no stranger in Sabah as well. In February this year, the group won another 200-bed medical facility contract in Kota Kinabalu worth RM331mil.

- If successful in its latest bid, WCT’s new contract wins for FY12F could well surpass market expectations at closer to RM3bil. This suggests more upside to our FY13F net profit forecast of RM192mil (+13% YoY).

- We do not expect WCT to encounter any funding issues to spur its order book expansion – including that of PFIrelated contracts.

- The group had recently proposed to raise up to RM1bil in bonds and a 3-for-20 bonus issue plus warrants to meet its long-term funding gaps.

- Valuations are undemanding at core FD 12F-14F PEs of 9x-12x against EPS CAGR of 10%.   

Source: AmeSecurities