WCT (Risks Already Factored In AT Current Valuations)

At rm2.14 it is valued at only 10.4 times forward earnings and 1.15 times book value.

At these valuations, which are well supported by fundamentals, WCT could be a stock worth holding. While there is poor visibility on order book replenishment at the moment, any news of potential jobs would be a re rating catalyst for the stock.

In the meantime, the group’s rm3 billion order book ensures that its earnings can be sustained in 2014.

In Dec 2013, the EPF has trimmed its holdings by more than 12 million shares or 1.13% bringing its stake to 10.97%. Tabung Haji has been a net buyer buying up some 16 million shares in the same period to 9.21%.

Meanwhile, its founder and largest shareholder, Taing Kim Hwa picked up about 250000 shares in the open market in late Dec 2013.

The immediate potential catalyst for WCT is the rm1 billion tender for a road project in Oman. However, there is a little uncertainty over the project which was supposed to be awarded late 2013, but has since been delayed.

WCT’s current (01 Jan 2014) share price has already factored in the possibility that it will not get the job. That goes to say even if WCT fails to bag the Oman job, its share pr ice should not drop further. The Oman job would be a nice bonus, but the bulk of its order book replenishment will likely come from local jobs that have higher margins.

For 2014, should be slightly better for WCT as there are quite a number of projects that it can benefit from and it is one for the more cost competitive players out there.

Potential projects for WCT are the final phase of the Gemaas-Johor Baru double tracking and electrification works, the Putrajaya building works and the next MRT line.

However, it is not going to be an easy year for the construction sector.

It has a healthy order book of rm3 billion.

The negative sentiment on the property sector has also weighed down on WCT. However WCT could be sheltered from the worst of it. Many of the group’s developments are in Medini, Johor, which has been designated as a special economic zone in Iskandar Malaysia and is exempted from Budget 2014’s various property cooling measures.

Its recurring income base is posed to widen in 2014 with the opening of the Gateway@KILA2 mall at the new LCCT, which is scheduled to open by May 2014. If not opened, WCT should receive compensation for any delays.

All in all, WCT current (06 Jan 2014) valuations with most of the risks already factored in and earnings secured.