WCT’s order book estimated at record RM5.2 billion

PETALING JAYA: WCT Holdings Bhd’s order book is estimated to stand at a new record high of RM5.2 billion, translating into 3.5 times FY16 construction revenue, said Hong Leong Investment Bank (HLIB) Research.

This follows the latest award of a RM840 million contract by Prasarana for the LRT3 project. Works for the contract are to be completed within 33 months.

With the LRT3 contract in the bag, HLIB Research said this would boost WCT’s year-to-date job wins to RM1 billion. This contract is WCT’s second LRT3 related job secured this year, with the earlier one being the depot at Johan Setia worth RM186 million.

It said the contract win is within the management’s guidance as the group previously mentioned it has bid for four packages of the LRT3 project worth RM800 million to RM2 billion each.

TA Securities, which maintained a “sell” call on WCT with a target price of RM1.49 noted that the contract award could provide earnings visibility to the group’s construction division for the next three years.

“Assuming a profit before tax margin of 6%, we forecast this project to generate a net profit of RM38.3 million throughout the contract period.”

WCT also announced that it will be undertaking a proposed joint venture (JV) with CCCG Overseas Real Estate (CORE) and China Communications Construction Company (CCCC) to develop a plot of land measuring 1.65 acres at the Tun Razak Exchange.

WCT, CORE and CCCC will own 20%, 65% and 15% equity interest in the JV respectively. CORE and CCCC will pay RM200 million to WCT, the owner of the land.

WCT acquired the land back in October 2015 from TRX City for RM223 million comprising 10% in cash and 90% in construction of infrastructure and roads for the latter.

Based on the recent price tag for CORE and CCCC’s 80% stake in the JV, HLIB Research said this now effectively values the TRX land at RM250 million.

“We are positive on this JV as it eases WCT’s future capital commitments. Without the JV, WCT’s cash flow could be strained from the construction contract for TRX as it is partially paid in land; and eventual development of the land.”

The previous development plan was for a service residence with a gross development value of RM1.1 billion.

On a proforma basis, HLIB Research said the JV (80% sale of TRX land) will reduce WCT’s net gearing from 86% in Q2’17 to 80%.

The research house is maintaining a “buy” call on WCT with a target price of RM2.26.

WCT shares fell five sen to close at RM1.75 on Wednesday on some 3.71 million shares done, giving it a market capitalisation of RM2.47 billion.