WCT held a post-2Q09 briefing for analysts and fund managers. Apart from the usual update on the group’s operations, much of the session dwelt on the status of several projects that WCT is vying for both locally and overseas. The briefing reinforced our bullish stance on WCT’s outlook for 2H09, which could be a period of active newsflow on new jobs that could push its RM2.8bn order book to over RM3.5bn by end-09.
Positive all around. WCT appears even more optimistic about its prospects of bagging new projects in the months ahead and appears to be close to securing another new job soon. The briefing reinforced our bullish stance on WCT’s outlook for 2H09, which could be a period of active newsflow on new jobs that could push its order book to over RM3.5bn by end-09. We believe it already has a high chance of bagging at least another RM500m worth of domestic jobs in the coming months. We make no changes to our FY09-10 forecasts which impute RM2bn worth of new jobs over the next two years. However, we raise our FY11 earnings by 4.2% to reflect stronger recognition of jobs as our earlier numbers were too conservative.
Maintain OUTPERFORM and RM3.90 target price. Our target price of RM3.90 is intact, which we continue to peg to a 20% discount to RNAV. Potental re-rating catalysts include (i) newsflow on new jobs, (ii) intensified pump-priming newsflow, and (iii) investors’ continued appetite for higher-beta stocks. WCT is among the cheapest stocks in the construction sector and is one of our top picks. It has a track record of winning jobs based on merit as it is one of the lowest cost and most efficient contractors in Malaysia.
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