KUALA LUMPUR (Oct 5): Shares in WCT Holdings Bhd rose as much as 2.31% at mid-morning today on the back of a seven-year high outstanding construction division's orderbook of RM7.2 billion amid a tough property sales outlook.

At 10.10am, WCT gained two sen or 2.31% to 88.5 sen, giving it a market capitalisation of RM1.2 billion. Some 1.5 million shares were transacted.

Over the past 12 months, the counter has fallen some 47.64%.

In a review today, CIMB Research said WCT's orderbook remains healthy after securing the RM1.8 billion mammoth building project for phase 1 of Pavilion Damansara Heights (PDH).

"We are positive about its seven-year high orderbook which should mitigate the downturn of jobs in 2019. WCT's REIT plan could make a comeback," CIMB Research analyst Shahrizan Rosely said.

Shahrizan said WCT's orderbook composition is predominantly domestic (94% of total orderbook; 6% overseas), external (98% of total orderbook; 2% internal) and civil infrastructure based (64% of total orderbook; 36% building works).

He added the group aims to be able to sustain a 9% to 10% pre-tax margin for construction, as there are still selected ongoing projects with relatively higher margins.

"Also, any potential margin downside from LRT 3 cost cuts can be mitigated by lower machinery cost spread over a longer project duration that was extended by four years due to the cost rationalisation exercise," he said.

In 2019, WCT will focus more on new tenders for building jobs as it targets RM1 billion to RM1.5 billion new wins (PBH Sabah — though it could be delayed, PDH Phase 2, TRX high-rise) which are 30% to 50% lower than its year-to-date wins of RM2.3 billion, according to Shahrizan

He said WCT aims to revive its REIT plans in mid-2019 and list four property investment assets (RM2.5 billion total asset value) which would deconsolidate RM600 million worth of debts.

"We are not too excited about the revival of the REIT plans for now, given execution issues and delays in the past," said Shahrizan.

Shahrizan has maintained his "hold" rating on WCT with an unchanged target price of 89 sen, and said LRT 3 and MRT 2 cost reduction as well as challenging inventory-driven property sales could pose downside risks to their forecasts.

He added that about RM20 million to RM30 million land sale gains should support 2H18F overall earnings.

"WCT trades at minus one standard deviation to its 10-year mean price-to-earnings of 15 times but lacks catalysts.

"Our target price is based on 60% discount to RNAV with upside risks from the REIT angle and job wins. The downside risk is deteriorating property sales," he said. — theedgemarkets.com

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