February 11, 2011

WCT - WCT to post record 2011 earnings

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

WCT Bhd
(Feb 11, RM3.39)
Maintain buy at RM3.34 with target price of RM3.75
: The results for 4QFY10, to be released on Feb 25, may surprise on the upside, despite a possible provision for Bakun CW2. There is no change to our net profit forecasts for now; we anticipate 33% growth in 2011 and 13% in 2012. WCT is expected to post record earnings in 2011. Our target price is unchanged at sum-of-parts RM3.75 after rolling over our valuation period, but based on fully diluted earnings per share with an estimated'' 158 million new warrants coming onstream. WCT stays a 'buy'.

Dam impoundment is progressing well, with wet testing scheduled for March/April. WCT may provide for additional costs for the remaining 4% of works to complete the contract. The amount could be as much as RM25 million, based on its 7.7% share in the consortium undertaking the CW2 contract. WCT's 2010 net profit, after the provision, could still surpass our RM138 million forecast due to: (i) a revaluation gain for the BBT AEON mall; and (ii) the final account close (in October 2010) for the Abu Dhabi F1 contract.

In 2010, job wins totalled RM2.2 billion, while the internal target for 2011 is a modest RM2 billion (50% domestic, 50% from'' the Middle East). The prospect is brighter for new Middle East jobs especially in Qatar, the host of the FIFA World Cup 2022 football tournament. On the domestic front, hopes are for a slice of the Klang Valley LRT extension Phase 2 works. The tender will be called in 2Q11. WCT remains in the running for a major water infrastructure job in Sabah worth RM2.8 billion, which may be parcelled out.

We retain our 2010/12 net profit forecasts pending the release of the 2010 final results. Outstanding construction order book of RM3.88 billion (September 2010), our RM2 billion'' job win per annum assumption and higher property sales in 2011 will support earnings expansion. There is still the possibility of a write-back for Bakun post-final account close beyond 2011, and re-recognition of Meydan Racecourse (Dubai) profit after the conclusion of its arbitration this year. WCT provided RM28 million for Bakun in 2004. It reversed RM84 million in profit for Meydan in 2008. ' Maybank IB Research, Feb 11


This article appeared in The Edge Financial Daily, February 14, 2011.

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