WCT bags RM70 mil earthwork contract from 1MDB Real Estate

WCT Holdings Bhd (Oct 6, RM1.47)

Maintain hold with an unchanged fair value of RM1.38: We maintain our “hold” call on WCT Holdings Bhd with an unchanged fair value of RM1.38 per share. This pegs the stock at a 45% discount to its net asset value per share. WCT announced on Bursa Malaysia that it on Monday accepted a letter of award from 1MDB Real Estate Sdn Bhd.

The award is for the proposed earthworks under Phase 1 of the Lifestyle Quarter of the Tun Razak Exchange mixed development. The scope of works consists of earthworks, rock probing and grouting works.

The entire contract is to be completed by November 2016. Its value is estimated at RM70 million. This represents WCT’s second local contract win after bagging another RM127 million earthwork contract for the Kwasa Damansara township development in Sungai Buloh, Selangor last month.

For the financial year to date, WCT has secured about RM1.1 billion worth of new contracts. This is a tad higher (about 6%) than our financial year ending Dec 31, 2015 new contract assumption of RM1 billion.

The latest wins also prove WCT’s track record in handling infrastructure works. Hence, we maintain our earnings and order book assumptions for WCT as the window to clinch more contracts gets narrower moving into the fourth quarter of 2015.

WCT’s ongoing tender book includes potential jobs within KL118, West Coast Expressway, Light Rail Transit 3, Mass Rapid Transit 2, Kota Kinabalu water supply scheme, Gemas to Johor Baru double tracking, hydro dams in East Malaysia and several other jobs in Qatar. But we believe that WCT needs to demonstrate stronger project delivery, particularly on the local front, to warrant a stronger rerating.

While the recent step-up in order book news flow is positive, the value of local jobs secured to date is still relatively small at a combined RM197 million. Moreover, the group needs to juggle between boosting its long-term recurring income via property investments and the need to rejuvenate its new construction order book. — AmResearch, Oct 6

Check out what properties are available for sale in Sungai Buloh HERE.

This article first appeared in The Edge Financial Daily, on Oct 7, 2015.