This article first appeared in The Edge Financial Daily on September 19, 2018

KUALA LUMPUR: WCT Holdings Bhd has surpassed its new jobs target for 2018 with its latest RM1.77 billion contract, which will also further enhance the group’s earnings visibility, said analysts.

Affin Hwang analyst Loong Chee Wei said he is positive about the contract announced by the group yesterday, adding that the group’s job wins year to date (YTD) is higher than his expectations.

“The contract will increase WCT’s order book to RM7.2 billion, equivalent to 5.2 times its 2017 construction revenue,” Loong told The Edge Financial Daily.

WCT, in a filling with Bursa Malaysia yesterday, said it secured the RM1.77 billion mixed property construction contract under the proposed Pavilion Damansara Heights commercial development.

The group said the work scope for the project along Jalan Damanlela encompasses the completion of nine blocks of office towers and three blocks of serviced apartments on a podium block. The podium block comprises retail space, mezzanine floors, besides the lower ground floor and basement car park.

“The work under the contract is expected to be completed within a period of 38 months. The contract is expected to commence in September 2018,” said WCT.

CIMB Research, in a note to clients, viewed the latest contract positively as it has raised WCT’s YTD wins to RM2.3 billion.

This is 16% higher than the group’s 2018 new job wins target of RM2 billion and 55% above the research house’s assumed wins for WCT.

The research house said although this award is considered a related party transaction, it involves a massive superstructure and building works contract in a prime area of Damansara.

Areca Capital Sdn Bhd chief executive Danny Wong Teck Meng said he is not surprised by the latest contract as it came from a related party.

“We expect the estimated RM30 million to RM35 million net profit per annum with 5% to 6% net margin from the new contract to spill over into FY19 (financial year ending Dec 31, 2019) and make up for the weakness in property earnings,” CIMB Research added.

WCT’s share price has fallen from a one-year high of RM1.77 on Jan 8 to as low as 69.5 sen on May 18. Yesterday, the stock was actively traded with 19.07 million shares changing hands. It closed higher by seven sen or 8.14% at 93 sen, valuing the group at RM1.32 billion.

Wong said WCT’s short-term outlook is weighed on the current soft property market coupled with the less promising construction outlook.

Loong, meanwhile, added that WCT’s high net gearing of 0.98 times and the delay in its degearing plans remain a concern.

CIMB Research expects limited upside to WCT’s share price from the latest contract win as it is offset by the subdued property sales outlook.

It added the upside risk for WCT is more job wins, while the downside risks are weaker sales and further delays in the group’s real estate investment trust plans.

The research house has maintained its “hold” call on WCT.