WCT - Dented by forex translation losses (CIMB)

WCT’s results at the midway stage were below expectations as annualised 1H11 core net profit made up only 77% of our forecast and 76% of consensus. We had underestimated forex losses for its Qatar projects, which are likely to persist in 2H11. But 2H is a seasonally stronger half and WCT remains optimistic that it will achieve its RM2bn new orderbook target by year-end, focusing on sizeable projects awards from Abu Dhabi. Factoring in forex losses and lower construction margins, we cut our FY11-13 EPS forecasts by 9-10%. Our target price declines from RM4.11 to RM3.99, pegged to an unchanged 10% discount to RNAV. Despite the earnings cut, we continue to rate WCT an OUTPERFORM and one of our top picks, with potential projects wins being its main re-rating trigger.