Analysts neutral on WCT’s first LRT3 award
KUCHING: WCT Holdings Bhd’s ( WCT) first Light Rail Transit Line 3 (LRT3) award has garnered neutral views as it was within the financial year 2017 estimate ( FY17E) replenishment target of RM2 billion, a research firm says.
In a filing on Bursa Malaysia, WCT announced that whollyowned subsidiary WCT Bhd had, on April 4, 2017, accepted the Letter of Acceptance issued by Prasarana Malaysia Bhd to undertake and complete the “Package TD1 - construction and completion of Johan Setia Depot ( Phase 1) and associated works for construction and completion of LRT3 from Bandar Utama to Johan Setia” for a contract sum of approximately RM185.9 million.
“The works under the contract are expected to be completed within 18 months from the date of the letter of acceptance,” the group said.
According to the research arm of Kenanga Investment Bank Bhd ( Kenanga Research), this marks WCT’s first win for the year and also the first contract award from the highly anticipated LRT3 project.
However, Kenanga Research was neutral on the contract award as it was comfortably within the research arm’s order-book 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 RM7.4 million to its bottomline per annum,” the research arm said.
Kenanga Research noted that this particular contract award brought WCT’s external outstanding order-book of circa RM5 billion to RM5.2 billion, providing earnings visibility for the next 2.5 to three years.
While they have won the first of LRT3 works, the research arm anticipated that they may bag more jobs from LRT3 on the viaduct packages in the medium-term.
“Other job prospects currently are underpinned by contracts from Kwasa Damansara and TRX, which are likely to flow in from FY17,” it said.
All in, no changes were made to Kenanga Research’s ‘underperform’ call
However, Kenanga Research upgraded its sum of parts (sop) - driven target price to RM1.80 per share, from RM1.58 per share previously, after rolling forward its construction valuation base year to FY18E as the research arm started rolling forward for the sector.