Secures New Project Worth RM214mn from the EPF

WCT has been awarded a new contract worth RM214.0mn from Kwasa Land Sdn Bhd, a subsidiary of the Employees Provident Fund (EPF), to carry out the construction of common infrastructure works at the Kwasa Damansara township development in Sungai Buloh. The job scopes for this contract includes site clearance, demolition works, earthworks, geotechnical works, road works, bridge structure, vehicular underpass structure, drainage works, water reticulation, sewerage works, mechanical and electrical works, river improvement and routine maintenance works.

The project is slated for completion within 30 months, starting from 1 August 2024.

Our View

This marks WCT’s second job win in 2024, bringing the year-to-date total to RM463.7mn. With this new job, we estimate WCT’s total outstanding order book to be approximately RM2.7bn, which is equivalent to 2.3x its FY23 construction revenue.

Assuming a PBT margin of 5%, this project is anticipated to contribute a net profit of RM8.1mn throughout the construction period.

Forecast

No changes to our FY24-26F earnings forecasts as the new job falls within our FY24 order book replenishment assumption of RM1.0bn.

Valuation

We raise our target price to RM1.52 from RM0.83 by shifting our valuation methodology to a 0.65x P/B multiple against its CY25 book value per share. This valuation reflects a 45% discount compared to IJM’s target P/B of 1.2x, considering WCT’s smaller market capitalization. The shift in valuation methodology better reflects the deep value embedded in WCT's investment property assets. We believe WCT’s decision to establish and list a REIT will unlock the value of these investments.

Overall, we are positive about the proposed exercise, as the proceeds from the REIT listing will enable the group to primarily reduce borrowings and capitalise on strategic opportunities as they arise. Additionally, we believe WCT remains a strong contender for upcoming mega-infrastructure projects, including the Penang International Airport Expansion, Penang LRT, and Subang Airport Regeneration Plan. Upgrade WCT from Hold to Buy.

Source: TA Research - 16 Jul 2024