This article first appeared in The Edge Financial Daily on March 23, 2020

WCT Holdings Bhd 
(March 20, 31.5 sen)
Maintain buy with an unchanged target price of 64 sen: Last Thursday, based on a Bursa announcement dated March 19, 2020, the group has accepted a letter of award (LoA) from Jendela Mayang Sdn Bhd. Under the LoA, WCT Holdings Bhd is to undertake superstructure works of the Pavilion Damansara Heights (Parcel 2) mixed development which comprises part of the proposed integrated commercial and residential development.

This is the first contract clinched by WCT this year. We note that as of the end of February 2020, the group’s order book stood at RM5 billion. The new contract award will add another RM1.2 billion which expands the group’s order book to RM6.2 billion. We think that this is a good start to the year for WCT because the group secured only RM119 million worth of new contracts in the previous year (and RM2.67 billion in the year before).

The scope of works under the contract shall encompass the execution and completion of: i) one block of a 32-storey office and hotel on a podium block comprising retail space; ii) mezzanine floors and works on the lower ground floor and basement car park; iii) two blocks of residential towers; iv) hard and soft landscape works and external works (including road and drainage, water reticulation and sewerage); and v) a Mass Rapid Transit link bridge. 

The estimated completion period of the Pavilion Damansara Heights project is 42 months. As for the scheduled commencement date, the project is slated to start in May 2020. In addition, we make no changes to our earnings estimates as the value of new job secured is within our contract replenishment assumptions.

We opine this new project win will help to improve investor sentiments towards WCT after it received an unfavourable final award ruling in an arbitration case on March 15, 2020. The downside risk to our call is a delay in the commencement of the job clinched due to the ongoing Covid-19 pandemic. 

To recap, on Sept 14, 2018, WCT secured a contract worth RM1.77 billion from Impian Ekspresi Sdn Bhd for the construction and completion of Pavilion Damansara Heights (Parcel 1) commercial development project which comprises: i) nine blocks of office towers and three blocks of serviced apartments on a podium block comprising four retail space floors with one lower ground floor; ii) one mezzanine floor; and iii) eight basement car park floors. 

A year after, on Aug 27, 2019, the group accepted a letter of intent from Jendela Mayang for Pavilion Damansara Heights (Parcel 2). — MIDF Research, March 20