WCT’s second LRT3 job enhances earnings visibility for 2, 3 years
KUCHING: WCT Holdings Bhd’s ( WCT) second LRT3 job has enhanced the group’s earnings visibility for the next 2.5 to three years, analysts observed.
In a report, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) said its outstanding order book stands at circa RM5.4 billion after the above contract award, providing earnings visibility for the next 2.5 to three years.
“The remaining order-book replenishment assumptions have been reduced to RM1 billion,” it added.
As for its property division, the research team noted that WCT’s unbilled sales stands at RM487 million with 1.5 years visibility and management intend to continue with their re-pricing strategy to clear its existing inventories amounting to gross development value (GDV) of RM644 million.
On the LRT3 job, Kenanga Research pointed out that this marks WCT’s second win for the year as well as the second contract award from the highly anticipated LRT3 project.
However, the research arm said, the contract award has neutral impact on the group’s earnings estimates as it is still within its orderbook replenishment assumption of RM2 billion for FY17.
“Nonetheless, assuming conservative pre-tax margins of eight per cent, this particular depot work is expected to contribute circa RM18.3 million to its bottomline per annum,” it added.
Meanwhile, it noted that WCT also announced a proposed joint investment with CORE (Singapore) TRX Investment Pte Ltd( CORE SPV) and China Communications Construction Company ( M) Sdn Bhd to undertake the development in Tun Razak Exchange ( TRX), which is currently wholly owned by WCT.
“Based on its proposal, WCT will raise RM200 million worth of funds from the proposed joint-investment from the Chinese parties, which will be used to pare down WCT’s gearing,” it explained.
Overall, it is positive on the proposed joint-investment as WCT’s second quarter of 2017 (2Q17) net gearing will lighten from 0.86folds to 0.79-folds from the funds raised.
Kenanga Research maintained its ‘ market perform’ call on the stock.