• 3Q15 core profit was below our and consensus estimates due to slower construction works progress, higher interest cost.
• Earnings estimates unchanged pending analyst briefing today.
• Maintain BUY with an unchanged TP of MYR2.20.

What’s New

9M15 headline net profit of MYR150m (+50% YoY) included forex gains of MYR122m. 9M15 core net profit was MYR39m (-63% YoY), accounting for just 43%/32% of our/consensus full-year forecasts. The shortfall was due to slower-than-expected construction works progress in 3Q15 and a higher-than-expected interest cost which offset stronger-than-expected property development EBIT margins. 3Q15 construction core EBIT grew by 113% QoQ (+83% YoY) led by recovery of its core EBIT margins to 13.5% (+9ppt QoQ, +9ppt YoY). Nevertheless, it was partly offset by slower construction works recognition (-28% QoQ, -33% YoY).

Property development 3Q15 EBIT rebounded 217% QoQ (+98% YoY) due to: i) stronger progress billings (+60% QoQ, +21% YoY) and ii) higher EBIT margin at 21.6% (+11ppt QoQ, +8ppt YoY).

What’s Our View

Although construction works recognition could pick up in 4Q15, WCT would likely miss our full-year 2015 core net profit forecast due to the higher interest cost. While we have yet to impute its new job wins YTD of MYR2.8b that exceeded our MYR2b forecast, there is downside to our 2015-17 property sales estimates. We maintain our earnings forecasts pending an analyst briefing today. That said, we expect WCT’s job win streak to continue into 2016. Meanwhile, actions taken to alleviate its gearing would also be positive to stock sentiment. Maintain BUY at an unchanged MYR2.20 RNAV-TP.

Source: Maybank Research - 25 Nov 2015