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WCT has shovelful of jobs

WCT Bhd (Mar 5, RM2.66)
Maintain buy with a higher target price of RM3.17 from RM2.93 previously:
WCT has indicated it will secure a number of contracts including one worth RM400 million for Vale SA's distribution centre in Teluk Rubiah, two buildings in Putrajaya worth RM1 billion and a hospital in Iskandar Malaysia. Elsewhere, RM1 billion worth of properties will be launched this year, with its Paradigm Mall expected to bring in rental income by 2QFY12. We like WCT's three-pronged approach to expand its property development, investment and management activities by leveraging on its engineering and construction expertise.

WCT's construction order book stands at a sturdy RM2.7 billion, with the bulk comprising jobs from the Qatari government administrative office. As the group has secured RM631 million worth of jobs year- to-date, we peg our FY12 and FY13 order book replenishment rate at RM2 billion a year.

For FY12, the group is targeting to launch new projects worth RM1 billion, mainly luxury homes near its Bandar Parklands development, serviced apartments at its Paradigm project in Kelana Jaya and Phase 2 of its 1Medini project in Iskandar Malaysia. We are now modelling for more modest property sales of RM400 million a year for both FY12 and FY13, up from our earlier assumption of RM350 million a year.

Incorporating WCT's full year FY11 results into our model and higher property sales forecast, we are revising our FY12 earnings downward by 4.1% for bookkeeping purposes, while our FY13 earnings remain largely unchanged with core earnings of RM229.4 million. We maintain our "buy" call, at a revised fair value of RM3.17, based on a higher price-earnings ratio of 14 times FY12 earnings from 12 times previously. This is in view of the improving sentiment on the construction sector as a whole as well as the company's enlarged share base of 832.2 million shares following its employee share option scheme and exercise of warrants. — OSK Research, March 5

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