WCT ... Jul12

TA Securities Research ...

RM391m North-South Expressway Fourth Lane Widening Works
WCT Berhad (WCT) has bagged a contract for the Proposed Fourth Lane Widening between Nilai (Km280.4) and Seremban (Km258.5), Package E, worth RM391mn, from UEMB-MRCB JV Sdn Bhd. This was one of the potential projects we expect WCT to secure, as highlighted in our previous report.

The contract sum is approximately RM391mn which include provisional sum of RM10mn and prime cost sum of RM216mn respectively, and the works are expected to be completed in December 2014 and contribute positively to the group’s FY12-14 earnings and net assets.

The scope of works under the Contract include demolition and clearing, earthworks for widening of formation in re-cutting of existing cut slopes and widening existing embankment, retaining walls, ground improvement, extension of drainage culverts, construction of new surface drains, widening of bridges, extension of vehicular box culverts, relocation of existing utilities, pavement and shoulder construction, overlay of existing pavement, guardrail and fencing, traffic signs and road marking; and traffic management during construction.

This brings the number of projects secured year to date to four with a total contract sum of approximately RM1.1bn. With the remaining 6 months in FY12, the group is on track to achieve its target order book replenishment of RM1.63bn for FY12.

We understand that the group is bidding for the northern portion of the widening works between Duta and Rawang as well.

Forecasts
As the job secured is within part of our forecast job replenishment expected by the company for FY12, we maintain our FY12-14 earnings projections. We maintain our new jobs assumptions of RM1.5bn for FY12-13 and RM2bn for FY14.

Valuation
We roll forward our valuation to FY13 earnings and derive at a fair value of RM3.52/share, based on 14x CY13 construction earnings and 10x CY13 property earnings. Given an upside of 43.7%, we maintain BUY call.