WCT (MIDF Research) maintain buy; target price RM3.87

WCT Berhad  Maintain BUY
BOT for a new LCCT for up to 25 years concession

INVESTMENT HIGHLIGHTS
•  KLIA2… WCT has  received a RM486m  job  for  the  construction of the new Low Cost Carrier Terminal, dubbed the KLIA2, from MAHB. Subsequently,  both WCT  and  MAHV  will  jointly  undertake  the  25 years  concession  via  a  SPV  under  a  70:30  sharing  basis respectively.

•  The  job.  The  integrated  KLIA2  complex  comprises
(i)  a transportation hub for taxis and buses,
(ii) one building block with a lettable area of about  437,000  sq  ft  (Landside Mall)  and 
(iii) 6,000 bays  car  park.  The  construction  of  the  complex  is  expected  to  be completed by 30 June 2012.

•  RM2.9b  outstanding  order  book  and  growing.  The  group continued  to aggressively  bidding  for new  jobs, both overseas and domestic  in  order  to  replenish  its  existing  orderbook  of  RM3.2b. Apart from KLIA2, other big project secured this year is the RM221m Bahrain City Centre Hotels Fit Out Works in February. Besides that, WCT  is  also  bidding  other  jobs  in  Iskandar Malaysia,  Johor  and  a major  water  infrastructure  work  in  Sabah.  We  believe  that  WCT would remain its 50:50 split between local jobs and the Middle East contracts. 

•  FY11  earnings  projection  revised  upwards.  We  revise  our earnings  forecast  for WCT  to  take  into  account  income  from  the construction  of  this  new  complex  but  we  have  not  imputed  any numbers  relating  to  the  concession  until  more  detail  is  made available. 

•  Maintain BUY with a higher target price of RM3.87/share pegged at 15x FY11 earnings versus previous valuation of RM3.30 at 14.5x FY10 EPS