WCT Holdings Bhd (Oct 6, RM1.79)
Maintain neutral with an unchanged target price (TP) of RM2: WCT Holdings Bhd received its third package for light rail transit 3 (LRT3) last Thursday, with a contract sum of RM640 million.
Recall that the group had earlier secured two packages under LRT3, namely Package TD1 — construction and completion of Johan Setia Depot (Phase 1) and associated works for a contract sum of RM185.9 million in April 2017, as well as Package GS03 — construction and completion of a guideway, stations, park and ride, ancillary buildings and other associated works for a contract sum of RM840 million in August 2017.
New jobs from LRT3 this year alone are already totalling RM1.7 billion, within our job replenishment assumption of RM2 billion. Hence, earnings estimates are kept unchanged. We maintain our “neutral” recommendation with an unchanged sum-of-parts-derived TP of RM2.
The RM640 million job is to undertake and complete “Package GS02”, which is for the construction and completion of a guideway, stations, park and ride, ancillary buildings and other associated works for construction and completion of LRT3 from Bandar Utama to Johan Setia.
The scope of works, among others, includes the construction of a guideway from Merchant Square to Suria Damansara, stretching 2.9km long with two stations, and it is adjoining to the guideway under Package GS03, which continues from Suria Damansara to Temasya Glenmarie, stretching 2.8km, making it a total length of approximately 5.7km, with four stations under Package GS02 and Package GS03.
The project is expected to take up to 35 months to complete. The new job is estimated to increase the group’s outstanding order book to about RM6 billion, ensuring earnings visibility for the next three to four years. — PublicInvest Research, Oct 6
This article first appeared in The Edge Financial Daily, on Oct 9, 2017.