AmResearch keeps Buy call on WCT Holdings, FV RM2.80
KUALA LUMPUR: AmResearch is maintaining its Buy recommendation on WCT Holdings with a lower fair value of RM2.80 a share from RM2.85 on an unchanged 15% discount to its sum-of-parts value.
"Stripping off revaluation gains of about RM53mil in 4Q13, WCT reported a flattish FY13 core net profit of RM145mil," it said.
The research house said in the quarter, WCT also prudently revised margins for some of its ongoing jobs amid a more challenging cost environment. This should put the group on a cleaner slate moving into FY14F. Construction margins were 6.2% in FY13 versus 7.4% in FY12.
WCT secured RM670mil worth of new contracts in 2013 on an outstanding orderbook of RM2.7bil as at Sept 30, 2013.

"As this was below initial expectations of over RM1bil, we expect WCT to step-up its job hunt moving into 2014. The group is reportedly bidding for RM3bil-RM5nil worth of prospective jobs - the bulk coming from Malaysia.
"Key bids include:

(i) Putrajaya Lot F (c.RM1.5bil);
(ii) sections of the RM5bil West Coast Expressway;
(iii) Tun Razak Exchange earthworks Zone 2 & 3 (RM200mil-RM300mil);
(iv) RAPID civil works (Phase 2); and
(v) MRT station works near KL Sentral.

"Furthermore, WCT remains keen to participate in the KWASA Damansara project - both as a contractor as well as a developer," it said.

AmResearch said WCT's new property sales for FY13 came in at RM500mil, below the targeted RM775mil. Nevertheless, it expects property sales to re-accelerate as part of the shortfall is due to delays in the advertising permits for two launches that would now flow through in FY14F.
The projects are:
(i) Laman Greenville (50% bookings on RM130mil sales); and
(ii) Paradigm Residences (40% bookings on RM80mil sales).

"WCT is ramping up its property investment portfolio. Local press reports recently quoted management as indicating that it could set up a REIT in 2018 once its total retail Net Lettable Area (NLA) hits 5 mil sq ft.
"The Gateway@KLIA is still scheduled to open its doors by May. We understand that pre-tenancy rates are now 80%, and could reach 85% when the mall opens. Average rental rates have perked up to RM22psf from RM15psf initially.
"The group is also looking to establish another two malls under the Paradigm brand in Taman Yarl (near OUG) and JB. The latter could be introduced by mid-2016," it said.