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WCT Holdings sets lower sales target for 2015 but could see rebound due to large landbank

KUALA LUMPUR (April 27): Affin Hwang Capital reported on April 24 that WCT Holdings Bhd has set lower sales target for 2015 but due to its 2,200 acres (890.31ha) of landbank, purchased at low cost, could be well positioned for a rebound.

The group has also accumulated a portfolio of property investments and concession assets, some of which are “REITable” as early as 2016. Official approval for the extension of the concession period for [email protected] would enhance valuation by as much as RM300 million, according to the report’s estimate.

After the group declined to a low of RM1.38 following uninspiring new contract wins and operating results, WCT Holdings' share rebounded and broke out of the RM1.40 to RM1.60 range. 

Affin Hwang Capital maintained its “buy” rating with an unchanged target price of RM2.12, based on an unchanged 14 times calendar year 2016E earning per share (EPS). The proposed rights issue would be EPS-dilutive but shareholders have been offered a low rights issue price of RM1 and bonus warrants. The conversion price of the existing Warrant C and Warrant D will be reduced to RM1.54 and RM1.71 respectively.

The report said more new contract wins should lead to further rerating of its share price. It also expected the share price to rerate high, given the March 15 Qatar contract win and improved prospects for local jobs.

Another RM1 billion of new contracts should enhance its billing visibility until financial year ending December 2017 (FY17E) and FY18E (estimate).

Key downside risks to the rating include further delays in the award of jobs in Malaysia and overseas, sharp spikes in construction costs and further government tightening measures affecting property demand. Due to slower property demand, a slower sales target for the group has been fixed for 2015.

The Affin Hwang Capital report was carried on The Edge Financial Daily today.

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