Long way to recovery for WCT

KOTA KINABALU: AmInvestment Bank Bhd (AmInvestment Bank) expects WCT Holdings Bhd’s (WCT) path to recovery to be filled with headwinds.

According to the bank in a report, WCT’s management had reiterated its guidance for job wins for FY18F at RM2 billion.

Expressing some doubt in WCT’s ability ro achieve this, AmInvestment Bank pointed out that their already conservative forecasts assume construction job wins of only RM1.2 billion for WCT annually in FY18 to 20F.

“And year-to-date, WCT has only secured on key construction contract – the RM555 million building job of retail malls and offices for Lendlease’s shopping mall in Tun Razak Exchange (TRX),” added the bank.

Looking forward, AmInvestment Bank is cautious on WCT and the construction industry’s ability to secure jobs in the future as the outlook of the local construction sector doesn’t look too good as the new government scales back on public projects and local contractors end up competing for a shrinking pool of new jobs in the market.

This would lead to severe undercutting among players and razor-thin margins for the successful bidders.

“On the other hand, the introduction of a more transparent public procurement system under the new administration should weed out rent-seekers, paving the way toward healthier competition within the local construction sector.

“We believe WCT is mitigated by its substantial order backlog that should keep it busy over the next 2 to 3 years, coupled with its proven ability to compete under an open bidding system,” said the bank.

At present, WCT’s outstanding construction order book stands at RM5.4bi, which could be eroded by about RM250 million in tandem with Prasarana’s initiatives to reduce the scope and hence cost of the LRT3 project.

WCT has guided for about a RM100 million reduction from the cancellation of station Lien Hoe and RM50 million each from the downsizing of three other stations within the two ground sections, GS02 and GS03, it is working on.

In any case, it might be a while before WCT can make a full rebound due to headwinds in the construction sector.

And it property division is also far from out of the woods as AmInvesment Bank guides that its unsold stock has only eased by 3 per cent to RM603 million from RM624 million three months ago.

The group has set a property sales target of RM300 million in FY18 but has so far only managed to lock in RM111 million property sales in 1HFY18.

Most notably, sales of its RM379 million condominium project – Waltz Residences – which came into the market by 2016 are not doing well with a take-up rate of only 38 per cent.