I like WCT-WC very much. My cost price is 0.46. Accumulate on weakness.

WCT -Fundamentals Remain Intact (M&A)

WCT Holdings Berhad
Current Price (RM)RM2.39
New Target Price (RM)RM2.78
“Fundamentals Remain Intact”

YTD financial review. WCT Holdings Bhd (WCT) earnings are set to end the year in an upbeat mode driven rapid implementation of various projects. 2014 outlook is no less exciting as the company is start the year with RM3 billion orderbook. WCT posted higher revenue of RM1.4 billion (+18% y-o-y) in 9M13 on the back of higher contribution from construction and property development division which rose by 15% y-o-y and 32% y-o-y to RM936 million and RM410 million respectively. 9M13 operating profit rose to RM225 million (+17% y-o-y) with the margin remains intact at 16% (9M12: 16%).

Construction. YTD, WCT has successfully secured RM670 million worth of new contract including: 
i) Lot 2C5, Putrajaya (RM315 million); 
ii) Zone 3, Phase 1 of Tun Razak Exchange (RM169 million); 
iii) Variation order for Qatar‟s Government Administrative Office (RM136 million) and 
iv) local projects (RM50 million). 

Moreover, the group‟s external order book is still healthy at RM2.2 billion comprising 67% local jobs and 33% from the Gulf States. WCT is targeting to win part of work package for Parcel F, Putrajaya worth approximately RM1.0 billion. However, the outcome of the bids for RM1.0 billion Qatar jobs would be delayed to 1Q14 as WCT is required to submit a revised tender.

Property. YTD, WCT has clinched RM462 million worth of property sales mostly derived from Bandar Bukit Tinggi (BBT) Township (60%). Unbilled sales remain upbeat at RM613 million as at 9M13. We believe that WCT is on track to achieve FY13 sales target of RM775 million underpinned by new property launches with total GDV of RM1.0 billion comprising; i) The Landmark, BBT2 (RM180 million); ii) Medini Condo, Iskandar Malaysia (RM418 million); iii) BandarParklands, Klang (RM71 million); iv) Laman Greenville, Klang (RM256 million) and v) Skyz Jelutong, Shah Alam (RM120 million).

Valuation & recommendation. WCT is worth RM2.78 and it‟s a BUY call. Key re-rating catalyst on the stock includes i) potential order book replenishment from construction division and ii) successful acquisition of landbank in Iskandar in the near term.

Source: M & A Securities 
Publish date: 07/01/14