Saturday, February 22, 2014

WCT - KLIA2 Gateway to provide recurring income (MIDF)

WCT Holdings Berhad
Price (11th February 2014) RM2.12
Target Price RM2.88
KLIA2 Gateway to provide recurring income

Management guidance numbers for KLIA2 Gateway income contribution are rather conservative.
We expect WCT to secure between RM1.5b and RM2b worth jobs this year, adding to RM2.7b outstanding orderbook. Aggressive property launches could show encouraging sales numbers in 4QFY13.
Our earnings forecast unchanged.

Hence, we reaffirm BUY recommendation on WCT Holdings with an unchanged TP of RM2.88.

Management guidance numbers are conservative. We are neutral on the expected bottomline of RM15m to RM20m from KLIA2 Gateway Mall guided by the Management as reported in the media yesterday. We believe the number is rather conservative as it is based on 80% tenancy. The expected net loss for this year is also in line with our estimates. Going forward, we deem the Gateway Mall will provide estimated recurring income of RM30m to RM45m per annum underpinned by 95% tenancy and growing footfall upon KLIA2 opening. To recap, WCT has 70% stakes in the Gateway Mall.

New construction jobs in the pipeline. WCT expects a strong pipeline of new construction jobs of RM1.5b to RM2b a year. The phase one of Kwasa Damansara new township will start soon with WCT slated as among the frontrunners to win its civil works worth RM1b. WCT is also targeting to secure earthworks, road and bridge works in the Gulf states worth RM1b and work packages of the RM5.9b West Coast Expressway (WCE). We believe it is timely for WCT to further grow its outstanding orderbook, which stands at approximately RM2.7b currently.

Limited impact from property cooling measure. We understand WCT is still on track to meet its FY13 property sales target of RM775m backed by RM1b in new launches, despite various property cooling measures introduced by the Government last year. As of 3QFY13, the Group has already chalked up RM462m in property sales. We opine the demand for WCT’s property is still good as its BBT township is not generally a hotbed of property speculation. We are also positive on the possible REIT exercise for the upcoming three malls namely KLIA2 Gateway, a mall in Taman Yarl, Kuala Lumpur and Paradigm Johor Bahru, as this will unlock its
assets value.

Earnings unchanged. At current juncture, we make no changes to our earnings forecast.

Maintain BUY. At a target price of RM2.88, the valuation is attractive with significant share price upside potential of 35.8%. The current share price is trading at unjustifiably low P/E level of 10 times. Hence, we reaffirm our BUY recommendation on WCT Holdings



Source/Extract/Excerpts/来源/转贴/摘录: MIDF-Research,
Publish date: 14/02/14

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