WCT Holdings Bhd (Sept 21, RM1.36)

Maintain outperform with an unchanged target price (TP) of RM1.81: Last Friday, WCT Holdings announced that it had bagged RM127.4 million worth of infrastructure works from Kwasa Land Sdn Bhd.

The scope of works, such as earthworks, sewerage reticulation and sewerage treatment plant is for site preparation for the development of Kwasa Damansara township in Sungai Buloh, Selangor, which will span over 52 weeks and is expected to be completed by October 2017.

We are neutral on the contract award of RM127.4 million from Kwasa Land as it falls within our expectations. To recap, WCT has secured RM990 million worth of construction awards to date that make up 76% of our financial year 2015 (FY15) order book replenishment assumptions of RM1.3 billion.

Assuming a conservative pre-tax margin of 10%, this particular project would contribute RM4.8 million to the bottom line per annum.

WCT’s outstanding order book remains robust at RM2.6 billion from RM2.5 billion previously, and will sustain the group for two years.

That said, WCT is still looking to secure more domestic jobs such as from Petroliam Nasional Bhd’s refinery and petrochemical integrated development project works worth RM1 billion, the Tun Razak Exchange worth RM800 million to RM900 million, KL118 (Warisan Merdeka) worth RM2 billion, and also the West Coast Expressway worth RM600 million.

We maintain a sum-of-parts-based TP of RM1.81, which is at a 20% discount.

Our TP implies a forward price-earnings ratio of 13.4 times, which is in line with its five-year historical average forward PER. — Kenanga Research, Sept 21

This article first appeared in The Edge Financial Daily, on Sept 22, 2015.

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