#Hot Stock* WCT gains 2% on Tun Razak Exchange contract

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KUALA LUMPUR (April 17): WCT Bhd rose as much as 2% after the builder said it will be involved in the construction of a portion of the Tun Razak Exchange along Jalan Tun Razak and Jalan Davis here.

At 12.30pm, WCT settled at RM2.38 with some 838,000 shares changing hands after rising as much as five sen to RM2.39 earlier.

WCT said yesterday it had secured a RM169.26 million project from 1MDB Real Estate Sdn Bhd to consruct a portion of the Tun Razak Exchange.

The contract which includes site clearance, earthworks and rock excavation is expected to contribute positively to WCT's earnings between 2013 and 2015, the firm said.

Alliance Research Sdn Bhd analyst Jeremy Goh wrote in a note that the RM169.3 million contract which is the first in a series of earthworks and civil engineering packages of the Tun Razak Exchange, is lower than the research firm's estimates.

Goh who maintained Alliance's "sell" rating on WCT with an unchanged target price (TP) of RM2.05, said it was previously guided that the entire earthworks would amount to RM1 billion.

"We believe that this particular job contains a high element of “election risk” as the opposition party’s manifesto stated that it will dissolve 1MDB should it take over Putrajaya.

“This contract award is unlikely to revive sentiment on WCT following the cancellation of its sizeable Batinah Expressway project last week,” Goh said.

Hong Leong Investment Bank Bhd analyst Jarod Soon said while the research house had earlier expected a bigger contract value awarded by 1MDB, the job is still a "good win" for WCT.

Soon said WCT’s contract win may help the firm secure future job opportunities within the Tun Razak Exchange due to lower mobilisation cost and other synergistic benefits.

“It is still a good win for WCT as the RM169.3 million contract value represents 16.7% of FY12’s construction revenue and 6.4% of its previous outstanding orderbook of RM2.6 billion,” Soon wrote in a note.

Hong Leong is maintaining its "hold" call and TP of RM2.41 for WCT.