WCT (9679) : WCT Holdings - Weighed down by property
Target RM1.97 (Stock Rating: HOLD)
WCT's annualised 9M14 core net profit made up 87% of our full-year forecast and 97% of consensus. The results were below expectations as 9M14 operating stats point to a subdued 4Q, weighed down by property. The improved job wins in 2H14 are unlikely to fully offset this due to the timing of progress billings. These reasons underpin our FY14-16 EPS forecast cuts. Even after a rollover to end-2015, our target price falls as we update for balance sheet items (still based on a 30% RNAV discount). Medium-term outlook looks more challenging for the group's Iskandar high-rise launches but this could be balanced by its ventures in the Klang Valley. Prospects for more sizeable jobs depend on its tenders in the Gulf region. Maintain Hold; switch to Gamuda.
9M14 below expectations
Annualised 9M14 core net profit formed 87% of our full-year forecast and 97% of consensus. The results were below expectations as 4Q is likely to be flat yoy at best, though construction should lead to slight qoq growth. The weak property sales were more pronounced in Medini, Iskandar, resulting in a 14% yoy decline in property revenue and a 47% drop in EBIT.
Property looks weak going into FY15 too
Initial indications were that the 47% decline in 9M14 property development EBIT was mainly reflective of the poor take-up for the recent launches of the group's high-rise commercial buildings, attributed also to the oversupply situation. The guidance for the launch of landed units in Rawang by end-15 could suggest subdued property sales in FY14-15. We expect more guidance during the results briefing tomorrow. We cut our FY14 property sales assumption from RM900m to RM600m.
Domestic contract win target achieved
The good news is that the domestic contract wins (RM994m) have broadly met the group's and our target of RM1bn for FY14. There has yet to be any news about its tenders in Qatar for a c.RM1bn infrastructure project that has been on tender since early this year. A decision on this project could be FY15's story. The domestic outlook for job flow remains good but we believe WCT needs to aggressively target turnkey works as the subcontract segment remains competitive. We believe the group's chances of securing more infra works in Rapid and Tun Razak Exchange (TRX) are still fairly good.
Source: CIMB Daybreak - 25 November 2014
Target RM1.97 (Stock Rating: HOLD)
WCT's annualised 9M14 core net profit made up 87% of our full-year forecast and 97% of consensus. The results were below expectations as 9M14 operating stats point to a subdued 4Q, weighed down by property. The improved job wins in 2H14 are unlikely to fully offset this due to the timing of progress billings. These reasons underpin our FY14-16 EPS forecast cuts. Even after a rollover to end-2015, our target price falls as we update for balance sheet items (still based on a 30% RNAV discount). Medium-term outlook looks more challenging for the group's Iskandar high-rise launches but this could be balanced by its ventures in the Klang Valley. Prospects for more sizeable jobs depend on its tenders in the Gulf region. Maintain Hold; switch to Gamuda.
9M14 below expectations
Annualised 9M14 core net profit formed 87% of our full-year forecast and 97% of consensus. The results were below expectations as 4Q is likely to be flat yoy at best, though construction should lead to slight qoq growth. The weak property sales were more pronounced in Medini, Iskandar, resulting in a 14% yoy decline in property revenue and a 47% drop in EBIT.
Property looks weak going into FY15 too
Initial indications were that the 47% decline in 9M14 property development EBIT was mainly reflective of the poor take-up for the recent launches of the group's high-rise commercial buildings, attributed also to the oversupply situation. The guidance for the launch of landed units in Rawang by end-15 could suggest subdued property sales in FY14-15. We expect more guidance during the results briefing tomorrow. We cut our FY14 property sales assumption from RM900m to RM600m.
Domestic contract win target achieved
The good news is that the domestic contract wins (RM994m) have broadly met the group's and our target of RM1bn for FY14. There has yet to be any news about its tenders in Qatar for a c.RM1bn infrastructure project that has been on tender since early this year. A decision on this project could be FY15's story. The domestic outlook for job flow remains good but we believe WCT needs to aggressively target turnkey works as the subcontract segment remains competitive. We believe the group's chances of securing more infra works in Rapid and Tun Razak Exchange (TRX) are still fairly good.
Source: CIMB Daybreak - 25 November 2014
