October 12, 2010

WCT - WCT in the bag

Stock Name: WCT
Company Name: WCT BHD
Research House: OTHER

WCT Bhd
(Oct 11, RM3.25)
Recommend trading buy at RM3.20 with revised target price RM3.45 (from RM3.28)
: WCT announced it has been awarded the contract by MAHB to undertake the development of an integrated complex in the LCCT on a build-operate-transfer concession of up to 25 years. WCT will jointly undertake the job with MAHB via a special purpose vehicle. WCT will hold 70% equity interest and MAHB the remaining 30%.

The RM486 million integrated complex will be financed partly through internally generated funds and partly bank borrowings. The complex will comprise a transportation hub, retail mall with approximately 437,000sq ft of net lettable area and car parks. Overall, construction is expected to be completed by mid-2012.

The latest job is timely as the issue of order book replenishment has been plaguing the company for quite a while. So far this year, the group has only managed to secure around RM700 million worth of jobs (including the LCCT integrated complex). Nevertheless, during its recent analyst briefing, management reiterated its confidence that the RM2 billion order book target will be achieved by the end of this year. Therefore, we could expect more project announcements in the coming months. We had already factored into our earnings forecast the winning of some LCCT projects with an assumed margin of 6%. However, pending further explanation from management, we do not factor in any income from the concession into our earnings forecast for FY12 onwards.

Looking at the improvement in contract news flow, we are tweaking our target price from RM3.28 to RM3.45 by removing the 5% discount to its realised net asset value as we expect more projects will be announced by the group in the coming months. Given this, we are recommending a 'trading buy' call on the counter. ' BIMB Securities Research, Oct 11


This article appeared in The Edge Financial Daily, October 12, 2010.


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