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Earnings sheltered from any slowdown - WCT

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Earnings sheltered from any slowdown - WCT  Empty Earnings sheltered from any slowdown - WCT

Post by Cals Tue 27 Aug 2013, 12:15

Earnings sheltered from any slowdown
Business & Markets 2013
Written by Maybank IB Research  
Tuesday, 27 August 2013 11:23

WCT Holdings Bhd
(Aug 26, RM2.41) 
Maintain buy at RM2.37 with a target price of RM3:
 With an anticipated RM1 billion job win from Qatar and 45% of its operating profit coming from its property division, WCT’s earnings are partially sheltered from any slowdown in domestic CONSTRUCTION [] awards in the medium term. 

There is further rerating potential to the stock given its strong outstanding construction order book, strategic property landbank and growing recurring income from property investments. 

There is no change to our forecasts post an analysts’ briefing on Aug 23. We reiterate “buy” with an unchanged RM3.00 target price (14 times mid-2014 financial year [FY14] price-earnings ratio plus 20 sen increment from KLIA-Integrated Complex).

Second quarter (2Q) of FY13 property development earnings before interest and tax (ebit) should be higher after considering a RM7 million write-down of its Vietnam property projects. 

Excluding one-offs, 2QFY13 property development ebit improved 19% year-on-year (y-o-y) with a slight contraction in the ebit margin (-3 percentage points y-o-y). Meanwhile, 2QFY13 construction earnings outperformed on write-backs (amount not disclosed) from the Dukhan Highway project.

Locally, WCT has bid for building constructions in Putrajaya worth RM1 billion. It is also eyeing subcontracts from the West Coast Expressway. 

In Qatar, WCT is one of the three shortlisted bidders for a RM1 billion infrastructure construction project and the result would be announced soon. Job wins year-to-date amount to RM511 million. In the event job awards are delayed, WCT’s construction earnings are supported by its RM2.8 billion outstanding order book (end-June 2013) that would only be completed in 4Q15 and upcoming RM1 billion internal jobs from its property division.

New property sales achieved in 1H13 amounted to RM225 million, buoyed by healthy take-up rates of its projects in the Klang Valley as well as Iskandar Malaysia in Johor. 

Unbilled sales were upheld at RM480 million as at end-June 2013. Property sales growth momentum would persist with its RM1 billion worth of target launches in FY13.  — Maybank IB Research, Aug 26

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This article first appeared in The Edge Financial Daily, on August 27, 2013.
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