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WCT
Broadly in Line
WCT posted earnings of RM69m (-15.4% y-o-y) for 1HFY10 which were within our expectations but below consensus. In the Middle East, WCT came close to securing 2 jobs but has reverted to its clients to renegotiate as material prices have gone up.
On the domestic front, WCT is confident of securing part of the Sabah water supply job by 2H this year. It has also submitted a bid for the Kelau Dam, for which tenders have closed. We retain our forecasts but roll our valuation from mid-CY11 to FY11, raising our TP marginally to RM2.89. Maintain NEUTRAL.
Within estimates. WCT reported 2QFY10 revenue of RM513.4m (-56.4% y-o-y) and earnings of RM33.8m (-19.5%). Cumulative 1H earnings totaled RM68.7m (-15.4% y-o-y).
Over the same period, margins were higher, with EBIT and net figures at 13.9% and 7.5% respectively (vs FY09 at 7.4% and 3.8%). The higher net margins this year were mainly due to the high minority interests accounted for last year from the Abu Dhabi F1 job.
Although annualized earnings were 6.1% below our forecasts (8.9% below consensus), we deem this in line given the expected upward earnings momentum in the upcoming quarters.
Mild quarterly uptick. From a q-o-q standpoint, revenue surged 28.4% while earnings rose by a smaller 7.4%. The q-o-q dip in margins was probably due to the recognition of lower margin construction jobs vs 1Q and a higher effective tax rate incurred.
It is heartening to see the uptrend in earnings on a quarterly basis. We expect 2H to record higher profits in arriving at our full year projections.
Jobs in the pipeline. We understand that WCT was close to securing two infra-type jobs in the Middle East. However, the company has had to renegotiate the contract pricing because material prices have gone up and is awaiting a response from the client.
Each job could possibly be worth ~RM500m. Domestically, WCT has also bid for the Kelau Dam (RM200m), for which tenders have closed. Also, the WCT-Sinohydro JV has been prequalified for the Langat 2 treatment plant (RM1.5-2bn). For this project, we feel that tenders may not be called so soon given the uncertainty on the Selangor side.
Meanwhile, management remains confident of securing the RM2.8bn water supply job in Sabah by 2H this year. However, the initial award amount could be a much smaller RM1bn.
No changes, maintain NEUTRAL. As the results were in line, we make no changes to our estimates. However, we roll over our valuation parameter from mid-CY11 to FY11 earnings at the same 14x multiplier. WCT will be hosting an analyst briefing today.
We reckon that any changes to our projections will likely be minimal.
At 13-15x on FY10-11 earnings, we believe that the stock’s valuations are fair and retain our NEUTRAL rating.
Broadly in Line
WCT posted earnings of RM69m (-15.4% y-o-y) for 1HFY10 which were within our expectations but below consensus. In the Middle East, WCT came close to securing 2 jobs but has reverted to its clients to renegotiate as material prices have gone up.
On the domestic front, WCT is confident of securing part of the Sabah water supply job by 2H this year. It has also submitted a bid for the Kelau Dam, for which tenders have closed. We retain our forecasts but roll our valuation from mid-CY11 to FY11, raising our TP marginally to RM2.89. Maintain NEUTRAL.
Within estimates. WCT reported 2QFY10 revenue of RM513.4m (-56.4% y-o-y) and earnings of RM33.8m (-19.5%). Cumulative 1H earnings totaled RM68.7m (-15.4% y-o-y).
Over the same period, margins were higher, with EBIT and net figures at 13.9% and 7.5% respectively (vs FY09 at 7.4% and 3.8%). The higher net margins this year were mainly due to the high minority interests accounted for last year from the Abu Dhabi F1 job.
Although annualized earnings were 6.1% below our forecasts (8.9% below consensus), we deem this in line given the expected upward earnings momentum in the upcoming quarters.
Mild quarterly uptick. From a q-o-q standpoint, revenue surged 28.4% while earnings rose by a smaller 7.4%. The q-o-q dip in margins was probably due to the recognition of lower margin construction jobs vs 1Q and a higher effective tax rate incurred.
It is heartening to see the uptrend in earnings on a quarterly basis. We expect 2H to record higher profits in arriving at our full year projections.
Jobs in the pipeline. We understand that WCT was close to securing two infra-type jobs in the Middle East. However, the company has had to renegotiate the contract pricing because material prices have gone up and is awaiting a response from the client.
Each job could possibly be worth ~RM500m. Domestically, WCT has also bid for the Kelau Dam (RM200m), for which tenders have closed. Also, the WCT-Sinohydro JV has been prequalified for the Langat 2 treatment plant (RM1.5-2bn). For this project, we feel that tenders may not be called so soon given the uncertainty on the Selangor side.
Meanwhile, management remains confident of securing the RM2.8bn water supply job in Sabah by 2H this year. However, the initial award amount could be a much smaller RM1bn.
No changes, maintain NEUTRAL. As the results were in line, we make no changes to our estimates. However, we roll over our valuation parameter from mid-CY11 to FY11 earnings at the same 14x multiplier. WCT will be hosting an analyst briefing today.
We reckon that any changes to our projections will likely be minimal.
At 13-15x on FY10-11 earnings, we believe that the stock’s valuations are fair and retain our NEUTRAL rating.
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