WCT Holdings Bhd (Dec 16, RM1.51)

Maintain hold with a higher target price (TP) of RM1.65 from RM1.63: WCT Holdings Bhd has clinched a third contract from PRPC Utilities and Facilities Sdn Bhd, a unit of Petroliam Nasional Bhd, for utilities interconnecting and off-site facilities: the procurement, construction and commissioning of civil and infrastructure works on the storm drain central area of the Refinery and Petrochemical Integrated Development (Rapid) project (package 14-0401) worth RM322.6 million.

We are pleasantly surprised by this contract. Including this, WCT has secured a total of RM3.1 billion worth of jobs this year, way above ours and the consensus assumption of about RM2 billion on average.

Assuming a profit before tax margin of 8%, the contract is expected to contribute about RM25.8 million of the group’s pre-tax profit, spread over the next three years.

Year to date, WCT has secured a total of RM3.1 billion worth of new projects, pushing its balance order book to about RM4.4 billion or 3.6 times financial year 2014 (FY14) construction revenue.

We have made a small adjustment to our FY16 earnings forecast by an increase of 3.8% to reflect the earnings contribution from this contract. We would rather be more conservative, with our FY16 order book replenishment assumption at RM2 billion.

We maintain our “hold” call on WCT, with a new sum-of-parts-based TP of RM1.65 from RM1.63 previously. — BIMB Securities Sdn Bhd, Dec 16

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This article first appeared in The Edge Financial Daily, on Dec 17, 2015. Subscribe to The Edge Financial Daily here.

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