Share
Bakun provision not made in 1Q10
Within expectations. Results were in line with RM35m 1Q10 net profit comprising 21% of our full-year forecast and 22% of consensus’.
Outstanding order book of e.RM2.8b should drive stronger subsequent quarters while job win prospects stay positive. Further Bakun provision,
not made in 1Q10 results, is fully reflected in the share price. Maintain Buy with a RM3.40 TP based on 14x 2011 earnings multiple.
Margins rebound. 1Q10 net profit was down 11% YoY mainly due to completion of a major job: Abu Dhabi F1 (ADF1). This was expected. Net profit was up 7% QoQ mainly on margins rebound. Construction gross margin was 11.8% (4Q09: 6.3%), which we believe could be due
to billings recognised in 1Q10 for accelerated costs booked in 4Q09 for major jobs including the ADF1. Property development’s contribution
rose to 21% of group EBIT due to sales recovery in 2H09. Nonetheless, construction remained the earnings driver, at 72% of group EBIT.
Bakun provision. As anticipated, 1Q10 results did not include further provision for the Bakun CW2 works, as the JV partners are still seeking clarification from Sime Darby on its 13 May ’10 announcement of an estimated RM450m cost overrun for Sime Darby’s 35.7% stake in the
JV. This implies a likely provision of RM97m (12.5sen/shr) by WCT for its 7.7% stake in the JV. We understand that the JV’s records are for a much lower cost overrun than the implied RM1.26b at the JV level.
Maintain forecasts. We expect earnings uptrend in the subsequent quarters and retain our forecast for a 15% net profit growth in 2010. Works should pick up for the major jobs – New Doha Int’l Airport, Medini earthworks, Sepang LCCT earthworks and Bahrain City Centre fit-outs – with completion deadlines into 2011. We expect blended construction gross margin to track to 8-9% in 2010 (2009: 6.9%).
Maintain Buy. WCT’s share price has been severely punished by the Bakun fiasco – down 40sen from 4 May close of RM2.97 when news of
Bakun’s cost overrun surfaced vs. a 12.5sen negative impact in the worst-case scenario. The weak broader market did not help either. Nonetheless, this offers an opportunity to buy the stock for its near-term positives, including sizeable job wins in Malaysia, Qatar and Abu Dhabi. The stock remains our top pick in construction.
Within expectations. Results were in line with RM35m 1Q10 net profit comprising 21% of our full-year forecast and 22% of consensus’.
Outstanding order book of e.RM2.8b should drive stronger subsequent quarters while job win prospects stay positive. Further Bakun provision,
not made in 1Q10 results, is fully reflected in the share price. Maintain Buy with a RM3.40 TP based on 14x 2011 earnings multiple.
Margins rebound. 1Q10 net profit was down 11% YoY mainly due to completion of a major job: Abu Dhabi F1 (ADF1). This was expected. Net profit was up 7% QoQ mainly on margins rebound. Construction gross margin was 11.8% (4Q09: 6.3%), which we believe could be due
to billings recognised in 1Q10 for accelerated costs booked in 4Q09 for major jobs including the ADF1. Property development’s contribution
rose to 21% of group EBIT due to sales recovery in 2H09. Nonetheless, construction remained the earnings driver, at 72% of group EBIT.
Bakun provision. As anticipated, 1Q10 results did not include further provision for the Bakun CW2 works, as the JV partners are still seeking clarification from Sime Darby on its 13 May ’10 announcement of an estimated RM450m cost overrun for Sime Darby’s 35.7% stake in the
JV. This implies a likely provision of RM97m (12.5sen/shr) by WCT for its 7.7% stake in the JV. We understand that the JV’s records are for a much lower cost overrun than the implied RM1.26b at the JV level.
Maintain forecasts. We expect earnings uptrend in the subsequent quarters and retain our forecast for a 15% net profit growth in 2010. Works should pick up for the major jobs – New Doha Int’l Airport, Medini earthworks, Sepang LCCT earthworks and Bahrain City Centre fit-outs – with completion deadlines into 2011. We expect blended construction gross margin to track to 8-9% in 2010 (2009: 6.9%).
Maintain Buy. WCT’s share price has been severely punished by the Bakun fiasco – down 40sen from 4 May close of RM2.97 when news of
Bakun’s cost overrun surfaced vs. a 12.5sen negative impact in the worst-case scenario. The weak broader market did not help either. Nonetheless, this offers an opportunity to buy the stock for its near-term positives, including sizeable job wins in Malaysia, Qatar and Abu Dhabi. The stock remains our top pick in construction.
SHARE
TOP PICKS BY EDGEPROP
RENT
FEATURED
Havona Residence @ Taman Mount Austin
Johor Bahru, Johor
RM 2,800
4 beds |
2 bath |
sqft
RENT
FEATURED
Havona Residence @ Taman Mount Austin
Johor Bahru, Johor
RM 1,500
- beds |
- bath |
sqft
RENT
FEATURED
Taman Bukit Indah @ Iskandar Puteri
Johor Bahru, Johor
RM 2,000
4 beds |
3 bath |
sqft
RENT
FEATURED
Pangsapuri Orchid View Luxury Apartment
Johor Bahru, Johor
RM 3,500
3 beds |
3 bath |
1680 sqft
RENT
FEATURED
TriTower Residence @ Johor Bahru Sentral
Johor Bahru, Johor
RM 4,000
2 beds |
2 bath |
942 sqft
ROOM_RENTAL
FEATURED
TriTower Residence @ Johor Bahru Sentral
Johor Bahru, Johor
RM 4,000
3 beds |
2 bath |
1124 sqft
hero.jpg?GPem8xdIFjEDnmfAHjnS.4wbzvW8BrWw)
