WCT Holdings Bhd
(Oct 30, RM2.09)
Maintain “outperform” with target price (TP) of RM2.60: WCT Holdings Bhd (WCT) clinched its second job this financial year, after accepting a contract from Boustead Ikano Sdn Bhd to construct Ikano’s Ikea Cochrane Mall for RM651.6 million.
This is in addition to its RM341.9 million contract secured in July, or RM994 million of new jobs accumulated thus far.
No change to our earnings estimates as we have assumed RM1 billion in job replenishment in financial year 2014 (FY14).
WCT’s outstanding order book is estimated to exceed RM3.5 billion with the new job, ensuring earnings visibility for the next one to two years.
The new job involves the construction of a shopping centre with two levels of basement car parks, four levels of elevated car parks and four levels of retail, food and beverage and entertainment outlets.
The development is expected to be completed by the second half of 2016 (2H16). During the construction period, the job could add RM30 million to the group’s earnings with expected profit before tax (PBT) margin of 6%.
The value of Ikano’s Ikea Cochrane mall was at the lower end of the RM700 million to RM800 million guided by management. As for the tender book, we understand that WCT has submitted tenders worth RM4 billion, of which are local jobs worth RM2.5 billion. The jobs include subcontracting jobs from Technip in Refinery and Petrochemical Integrated Development (Rapid) and Tun Razak Exchange (TRX) earthworks.
Maintain “outperform” and our sum-of-parts-derived TP to RM2.60. We like WCT for its strategic shift towards a more sustainable business model of growing recurring income, and the group’s conservative capital management with relatively low gearing which would enable it to weather cyclical lows, as well as capitalise on investment opportunities. — Public Investment Bank, Oct 30
This article first appeared in The Edge Financial Daily, on October 31, 2014.