WCT Holdings Bhd (WCT) reported a headline net profit of RM173.2m in the 3QFY24, compared to a net loss of RM12.2m in 3QFY23, driven by a net gain of approximately RM184m from the remeasurement of interest in a jointly controlled entity. Excluding non-operational items, the cumulative 9MFY24 core net profit of RM49.8m was in line with our and market expectations, representing 69.2% and 75.1% of our and consensus full-year estimates respectively. We maintain our estimates and reiterate our Neutral call on WCT, with an unchanged TP of RM1.08 pegged at 0.4x PBV (+2SD).

• 3QFY24 revenue declined by 11.9% YoY to RM437.5m, as the engineering and construction (E&C) division saw a 35.1% YoY drop in contribution due to slower construction progress. This was partly offset by stronger contribution from property development and property investment & management divisions, with revenue increased by 49.2% and 32.9% YoY, respectively. The revenue growth was driven by improved property sales and higher occupancy rates and rental across its malls and hotels.
• 3QFY24 headline net profit surged to RM173.2m, compared to a net loss of RM12.2m in 3QFY24, primarily driven by a net gain of approximately RM184m from the remeasurement of interest in a jointly controlled entity. Excluding non-operational items, we estimated a core net loss of RM5.5m, mainly due to higher input costs in E&C division, as well as increased administrative and finance costs. This was partially offset by improved performance in Property Development and Property Investment & Management divisions. The Property Development segment's operating profit rose 51.0% YoY to RM12.9m, driven by higher margins and progress billings from on-going property projects. Meanwhile, core operating profit for the Property Investment and Management segment increased by 43.0% YoY to RM35.9m, supported by higher contributions from its hotels, attributed to strategic pricing adjustments and effective customer retention strategies.
• Outlook. The Group's outstanding construction orderbook, estimated at RM2.9bn, is expected to provide earnings visibility of 2-3 years. In the property segment, the Group has achieved YTD sales of RM906m against internal property sales target of RM950m for FY24, excluding land sales. Moving forward, the Group's earnings growth will be largely depend on its project execution, cost recovery from completed projects, and ability to replenish its construction orderbook.

Source: PublicInvest Research - 27 Nov 2024