Stock Name: WCT
Company Name: WCT BHD
Research House: MAYBANK
WCT Bhd
(April 12, RM2.80)
Maintain buy at RM2.77 with target price of RM3.40: WCT is our preferred pick among the construction big caps. We see a further upside in WCT's share price given good order flow visibility (we believe WCT could exceed its RM2 billion target of new contracts) and scope for margin expansion following the near-completion of legacy contracts. Its target price is pegged to 14 times 2011 earnings.
We assume RM2 billion of job wins in 2010. WCT's current order book (RM3.2 billion as at Dec 2009) is low by historical standards (peak backlog of RM7.3 billion worth of jobs). Potential awards include packages in the Klang Valley LRT extension, Pahang-Selangor water transfer (dam, piping, Langat 2), Sepang LCCT, water infrastructure in Sabah and infrastructure projects in the Middle East. We believe news flow on potential awards could intensify in the next 12 months.
WCT is benefiting from higher infrastructure spending in Qatar. Following the implementation of a fiscal stimulus programme by the Qatari government in 2009, the aggregate value of contracts awarded by the Qatar Public Works Authority doubled in 2009. For 2010, some US$378 million (RM1.21 billion) worth of contracts have been awarded in 1Q10 and about US$500 million worth of projects are up for tender. We believe WCT, with its partner, is actively sourcing for projects in Qatar.
We retain our net profit forecast, projecting a 15% growth in 2010, supported by an outstanding order book of RM3.2 billion and margin restoration for Middle Eastern jobs. For 2011, we project a 12% growth on higher contributions from property development after maiden launches in 2010 at 1Medini (gross development value: RM600 million), Paradigm (GDV: RM1.4 billion) and Vietnam's Platinum (GDV: RM1 billion). There is an upside to our forecasts on the final contract sum at ADF1 (Abu Dhabi Formula One track) and Bakun.
We believe WCT's valuations are not yet stretched. Its current share price implies a 2011 price-earnings ratio (PER) of 11.4 times versus a peak of 37 times. Its foreign shareholding, at 9% latest, has also retraced substantially from a recent peak of 28% as at end-2007/early-2008. - Maybank IB, April 12
This article appeared in The Edge Financial Daily, April 13, 2010.
Company Name: WCT BHD
Research House: MAYBANK
WCT Bhd
(April 12, RM2.80)
Maintain buy at RM2.77 with target price of RM3.40: WCT is our preferred pick among the construction big caps. We see a further upside in WCT's share price given good order flow visibility (we believe WCT could exceed its RM2 billion target of new contracts) and scope for margin expansion following the near-completion of legacy contracts. Its target price is pegged to 14 times 2011 earnings.
We assume RM2 billion of job wins in 2010. WCT's current order book (RM3.2 billion as at Dec 2009) is low by historical standards (peak backlog of RM7.3 billion worth of jobs). Potential awards include packages in the Klang Valley LRT extension, Pahang-Selangor water transfer (dam, piping, Langat 2), Sepang LCCT, water infrastructure in Sabah and infrastructure projects in the Middle East. We believe news flow on potential awards could intensify in the next 12 months.
WCT is benefiting from higher infrastructure spending in Qatar. Following the implementation of a fiscal stimulus programme by the Qatari government in 2009, the aggregate value of contracts awarded by the Qatar Public Works Authority doubled in 2009. For 2010, some US$378 million (RM1.21 billion) worth of contracts have been awarded in 1Q10 and about US$500 million worth of projects are up for tender. We believe WCT, with its partner, is actively sourcing for projects in Qatar.
We retain our net profit forecast, projecting a 15% growth in 2010, supported by an outstanding order book of RM3.2 billion and margin restoration for Middle Eastern jobs. For 2011, we project a 12% growth on higher contributions from property development after maiden launches in 2010 at 1Medini (gross development value: RM600 million), Paradigm (GDV: RM1.4 billion) and Vietnam's Platinum (GDV: RM1 billion). There is an upside to our forecasts on the final contract sum at ADF1 (Abu Dhabi Formula One track) and Bakun.
We believe WCT's valuations are not yet stretched. Its current share price implies a 2011 price-earnings ratio (PER) of 11.4 times versus a peak of 37 times. Its foreign shareholding, at 9% latest, has also retraced substantially from a recent peak of 28% as at end-2007/early-2008. - Maybank IB, April 12
This article appeared in The Edge Financial Daily, April 13, 2010.
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