WCT - Bahrain heats up (CIMB)

Although the 3-month state of emergency declared by Bahrain is a negative surprise, we draw comfort from management’s assurance that it is unlikely to derail the BCC fitout works. Furthermore, Bahrain makes up only 1% of WCT’s order book. Evacuation/contingency plans are in place. In the worst case, WCT would need to make a provision equivalent to less than 2% of FY11 net profit and less than 1% of RNAV. We make no changes to our forecasts, OUTPERFORM call or RM4.15 target price, which we continue to base on a 10% discount to RNAV. WCT’s share price has shed 21 sen or 17% YTD. An easing of the tension in the Middle East could spark a share price recovery, along with new project awards. WCT remains one of our top picks in the construction sector.