WCT impresses analysts (9679)

Company deemed good prospects with RM4bil order book and projects
DESPITE WCT Bhd's
19% decline in earnings before interest and taxes year-on-year in the
first half of financial year 2012, it is a favourable player in the
construction sector, with 87.5% of research analysts calling it a “buy”.
With
an outstanding order book of about RM4bil, it is not hard to understand
why. On the property front, its gross development value (GDV) was also
given a lift to about RM12bil with its latest purchase that came as a
“positive surprise”, according to an analyst.
Its latest proposed acquisition announced on Aug 23 is a deal between its indirect subsidiary WCT Hartanah Jaya Sdn Bhd and Idaman Usahamas Sdn Bhd, a unit of Malaysia Building Society Bhd.
The 12 acres in Tebrau, Johor Baru that comes with an abandoned
shopping podium will be bought for a consideration of RM180mil. The
freehold land is proposed for mixed development with a GDV of RM900mil.
About
a week before that, it has announced that its tender for the
construction and completion of Batinah Expressway Package 2 in Oman was
accepted. Winning this bid via its 80:20 joint venture with Oman Roads Engineering Co LLC
means it has bagged a contract worth RM1bil and would contribute
positively to its earnings for this financial year until the financial
year ending 2015. The 44.75km expressway is expected to be completed in
three years.
These are two of the latest developments that
continue to put the company in a positive light. Looking at some of its
other outstanding jobs, it has a government administrative office
project and New Doha International Airport in Qatar. Locally, it has
PLUS Highway widening works, KL International Airport 2 (KLIA 2)
earthworks, the Medini Iskandar contract and others. WCT has also
secured contracts from Vale Malaysia Manufacturing Sdn Bhd
for jobs at the latter's iron ore hub in Teluk Rubiah, Perak. It also
has in hand building projects such as the Kota Kinabalu Medical Centre
and Riverson and the International Trade and Industry Ministry
headquarters.
That is not all. The company has a order book of
about RM4bil. Some of the good prospects, according to analysts,
include earthwork packages for Pengerang Rapid in Johor, Tun Razak Exchange
projects in Kuala Lumpur, a teaching hospital in Sabah and the United
Arab of Emirates expressways. It is also in the running for contracts
from the My Rapid Transit and Langat 2 water treatment plant projects.
From
its property development arm, projects include its RM4bil mixed
development in Overseas Union Garden, Kuala Lumpur. In Rawang,
Selangor, it is developing a township with a gross development value of
RM1.5bil. Prior to that, it has developed its flagship township
development in Bandar Bukit Tinggi, Klang. It chalked up property sales
in the first half of RM376mil while its unbilled sales stood at
RM563mil.
As for recurring income, it has built pipelines from
construction concessions on one hand and rental yield from its shopping
malls on the other. The Paradigm Mall which was completed since May is
considered a success due to its high occupancy rate of about 97%. Its
Premiere Hotel in Klang completed since 2010 has 250 rooms and it is
opening up another 350-room hotel at Paradigm which is expected to be
ready in 2014.
However, it was not rosy all the way. Just a year
ago, WCT's construction business was lacklustre. The company is still
in a legal tussle with Meydan LLC
over a terminated racecourse in 2009. The financial impact following
the outcome of the proceedings remains unknown. Its better performance
this year is described as a comeback.
With the opportunities available from the Economic Transformation Programme
plus the 10th Malaysia Plan and good take-up rate for its property
segment, analysts are bullish about the company. A check from
Bloomberg's data showed that 87.5% of the analysts have given it a
“buy” call, with RM3.22 as a 12-month consensus target price.
The
counter was lowest on Jan 15 at RM2.18 and it reached a peak of RM2.78
on Feb 9 this year. Year to date (YTD), as of Aug 24, the stock
increased 18.94% from RM2.27 to RM2.70. At this rate, it is
outperforming the FBM KLCI which has increased 8.92% YTD.