This article first appeared in The Edge Financial Daily, on March 4, 2016.

WCT Holdings Bhd
(March 3, RM1.60 )
Maintain buy with a target price (TP) of RM2.30: Last Friday’s analysts’ briefing reiterated our upbeat view on WCT Holdings Bhd on strong construction job win prospects and improved earnings delivery in 2016. There is an upside to our conservative 2016 job win estimate. Our earnings forecasts are unchanged. Maintain “buy” on WCT as its potential earnings recovery and corporate exercises would rerate the stock. 

Management has clarified that fourth-quarter financial year 2015’s (4QFY15) reported net profit included several exceptionals. These included RM58 million fair value gains of The Ascent at The Paradigm office tower, which boosted its 4QFY15 joint-venture (JV) contribution. Excluding all exceptionals, 2015 core net profit of RM129 million (+15% year-on-year [y-o-y]) was above expectations as the core JV contribution doubled inlenishment of its solid order book 
of RM4.1 billion remains robust with potential awards from infrastructure projects and major transit-oriented developments. As for its property division, sales of RM373 million achieved in 2015 were below management’s target of RM584 million. WCT is planning RM1billion worth of new property launches in 2016, including the Paradigm Garden City@OUG that is expected to boost its property sales.

In 2016, both reported and operational earnings are expected to improve on gains from its recent Serendah land disposal (~RM215 million) and higher construction outstanding order book. There is also upside to our earnings estimates as we imputed RM1 billion job wins and RM400 million property sales in 2016, below management’s targets of RM2 billion and RM600 million respectively. We, however, maintain our earnings forecasts for now. — Maybank IB Research, Feb 29