We maintain our NEUTRAL call, forecasts and FV of MYR2.31. WCT
hasbagged a MYR342m roads package of the Refinery and
PetrochemicalIntegrated Development (RAPID) project. Nonetheless, it is
still not anideal proxy to the buoyant construction sector as it is not
involved inthe Klang Valley MRT project. Also, its property business is
facingheadwinds on the back of the various sector cooling measures.
First key job win in FY14.WCT has secured from Petronas a MYR341.9m
contract for the construction of common construction access and
permanent roads within the RAPID site in Pengerang, Johor. This is the
first key contract the company has secured in FY14, boosting its
outstanding construction orderbook by 11% to MYR3.4bn (see Figure 1).
Assuming an EBIT margin of 5-7%, the contract could fetch
MYR17.1m-MYR23.9m in EBIT over the contract period. We are positive on
development.
Forecasts. We maintain our forecasts as we have assumed contract wins of MYR1.5bn for WCT in FY14.
Risks to our view.These include: i) new construction
contracts secured in FY14-FY15 falling short of our assumption of
MYR1.5bn per annum, ii) higher-than-expected input costs, and iii) weak
demand for its property launches.
Maintain NEUTRAL.The prospects for the construction
sector are strong, underpinned by the MYR73bn Klang Valley mass rapid
transit (MRT) project, which would keep industry players busy until
2021. However, WCT is not an ideal proxy to the construction sector, as
it has yet to secure any work packages from the MRT project. In
addition, its property business is facing headwinds on the back of the
various sector cooling measures introduced by the Government. Our FV is
unchanged at MYR2.31 based on a 16x fully-diluted FY15F EPS of 14.5 sen,
in line with our benchmark 1-year forward target P/Es of 10x-16x for
the construction sector.
Source: RHB
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