This article first appeared in The Edge Financial Daily, on November 18, 2015.

WCT Holdings Bhd
(Nov 17, RM1.46)
Maintain buy with an unchanged target price (TP) of RM2.20: WCT Holdings has clinched a job from IJM Corp Bhd for subcontract works of the West Coast Expressway worth RM283 million.

The job scope covers site clearance, earthworks, geotechnical works, drainage works, box culverts, sub-base, road base and pavement, traffic signs, road markings and road furniture, utilities and services, erosion control sediment plan, environmental protection and enhancement. The total works are expected to be completed by the fourth quarter of 2018.

 This job win has lifted WCT’s outstanding external order book by 7% to RM4.3 billion. Assuming a pre-tax profit margin of 6%, we forecast a net profit contribution of RM12.7 million (1.1 sen earnings per share) into 2018. WCT’s total job wins year to date of RM3.02 billion are close to its 10-year high.

While it has exceeded our RM2 billion job win forecast for 2015, we maintain our earnings forecasts pending further details from the management. WCT is also eyeing construction jobs from the Pan Borneo Sarawak Highway, the Refinery and Petrochemical Integrated Development, the Tun Razak Exchange and Kwasa Land Sdn Bhd.

As the award progress of these projects is picking up, WCT’s job win streak could persist into 2016. Meanwhile, action taken to alleviate its gearing would also be positive to stock sentiment. Reiterate “buy” with an unchanged revised net asset value TP of RM2.20. — Maybank IB Research, Nov 16