This article first appeared in Capital, The Edge Malaysia Weekly, on November 23 - 29, 2015.

WCT Holdings Bhd has been on a roll, securing several projects in recent months. Earlier this month, the group secured yet another construction project at Petroliam Nasional Bhd’s Refinery and Petrochemical Integrated Development project in Pengerang, southern Johor.

This time, the RM315.6 million contract was from a Petronas subsidiary, PRPC Utilities and Facilities Sdn Bhd, for the utilities, interconnecting and offsite facilities.

The group also won a RM267 million project last month for the construction of a facility for Petronas Chemicals Group and last week, it won a subcontract for the West Coast Expressway from IJM Corp Bhd, worth RM282 million.

This puts the group’s external order book at an estimated RM3.9 billion, enough to last until 2017.

Last Wednesday, WCT’s share price closed at RM1.49 while its warrant, WCT-WE, closed at 20.5 sen

With a strike price of RM2.08 and a conversion ratio of one times, the warrants are being valued at a relatively high premium of 53.4%. In fact, the strike price of the warrants is even higher than the mother share’s.

So, what could make the warrants attractive?

For starters, they are relatively young and have plenty of life left — about five years as the derivatives expire in August 2020. They also have substantial leverage due to the high exercise price.

In addition, WCT Holdings has a relatively large order book to see it through the coming two years.

Over the past two weeks, WCT Holdings’ share price has gained 12.9%. The warrants, however, have jumped at a faster pace, gaining 36.7% in the same period.

Probably, WCT Holdings’ share price could perform better, but it is being held back by the relatively high borrowings on its balance sheet (53% net gearing) and the group’s property arm, which is expected to see a lacklustre performance in the face of a slowing property market, especially in Johor Baru.

Some 11 analysts have “buy” calls on WCT’s shares, seven “hold” and one “sell” call, with target prices ranging from RM1.30 to RM2.18.

Still, the share price is much lower than the highs of over RM2.20 that the company enjoyed in 2013 and 2014.

Looking ahead, there are still plenty of construction projects in the pipeline for WCT Holdings to take on. While the margins may be smaller on subcontracted packages, the group has shown that it is able to be competitive by consistently winning jobs.

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