This article first appeared in The Edge Financial Daily, on July 27, 2016.

KUALA LUMPUR: The Pan Borneo Highway theme continued yesterday as the momentum in job awards continued for the second consecutive day, with the latest contract valued at RM1.289 billion being clinched by a joint venture (JV) between KKB Engineering Bhd and WCT Holdings Bhd.

The KKB-WCT JV’s win followed the award of a RM1.36 billion contract to the JV between Bina Puri Holdings Bhd and Cahya Mata Sarawak Bhd for the same highway on Monday.

KKB and WCT told the local bourse in separate filings that the JV has bagged Phase 1 works for the Sarawak stretch of the proposed Pan Borneo Highway project from Lebuhraya Borneo Utara Sdn Bhd.

The contract was for the development and upgrading of the portions from Sungai Arip Bridge to Bintulu Airport junction, and is expected to be completed in 2020.

In addition, the JV company — an incorporated JV between WCT and KKB in the ratio of 30:70 respectively — is also tasked to conduct civil works such as demolition and site clearance, earthworks, geotechnical works, drainage work, roads and pavings.

It is also required to undertake the development of interchanges, bridge works, environmental protection and monitoring, traffic management and control, mechanical and engineering, and electrical infrastructure works, WCT’s filing read.

Commenting on this, WCT managing director Taing Kim Hwa said the award of the Pan Borneo Highway contract will further expand the current outstanding order book of RM4.4 billion as at March 31, 2016.

He said the contract is expected to contribute positively to WCT’s future earnings as well as help the group achieve the RM2 billion construction revenue target for current financial year ending Dec 31, 2016.

This would be the second contract win for the construction group this year. Early this year, it was awarded a RM133.93 million contract from Mass Rapid Transit Corp Sdn Bhd to redevelop the police quarters in Taman Keramat, Kuala Lumpur.

“The contract win of almost RM1.3 billion is positive for WCT, as it has a 30% equity stake in the JV. But I understand that its portion could be up to 70% via subcontract awards. This could work out to about RM900 million of the total contract value,” AllianceDBS Research analyst Chong Tjen San said.

Aside from the Pan Borneo Highway, Chong said WCT may also clinch jobs from Damansara-Shah Alam Elevated Expressway, Sungai Besi-Ulu Klang Elevated Expressway and Tun Razak Exchange.

“There is no doubt that it is a competent contractor. But its balance sheet is still too highly geared even if they meet their RM2 billion order win target as projected,” he pointed out.

He maintained his “hold” call with an unchanged target price of RM1.55.

AffinHwang Capital Research analyst Loong Chee Wei concurred, saying he is maintaining his forecast for now as he had assumed WCT would win some jobs this year.

KKB fell three sen or 1.82% to settle at RM1.62, after 1.35 million shares changed hands, giving it a market value of RM417.62 million.

WCT surged three sen or 1.94% to close at its one-month high of RM1.58, with a market capitalisation of RM1.98 billion, with 3.12 million shares exchanged.