PETALING JAYA: WCT Holdings Bhd’s earnings outlook remains positive following its latest move to secure development rights over 411.4 acres of land in Lok Kawi, Sabah.
The group is also backed by a strong orderbook that would support earnings visibility.
“There is also a prompt resumption of (WCT’s) work operations as reflected in the strong rebound in earnings in the quarterly results,” said MIDF Research.
While MIDF Research had not made any changes to its earnings estimates for the group since the latest project has a long a gestation period, it had revised upwards its target price for WCT to 80 sen from 68 sen previously.
The research house also maintained its “buy” call on the group.
“This is based on pegging a forward price to earnings ratio (PER) of 14.0 times to the group’s financial year 2022 (FY22) forecast earnings per share of 5.7 sen,” it said.
The forward PER is a slight premium to its average of 13.3 times given its position as a prime beneficiary of 12th Malaysia Plan that focuses on addressing uneven development in Malaysia, particularly in states such as Sabah and Sarawak, it added.
MIDF Research said higher property sales for the group are also likely given the current accommodative environment; upcoming launches of products at strategic locations, especially in the central prime region; and a possible extension of the government’s Home Ownership Campaigns.
“We also think that the group remains a strong contender and major beneficiary of the continuation of mega public infra projects such as the Mass Rapid Transit 3, Pan Borneo Highway, Klang Valley Double Tracking 2 and the East Coast Rail Link as previously announced in Budget 2021 which would bode well for its order book replenishment,” it said.
These assumptions are premised on the group’s strong track record and vast experience in railway, highway and building projects, it noted.
“In addition, on a longer-term horizon, the group’s prospects are well-supported by its strong outstanding order book of about RM5bil which will provide earnings visibility over the next three to four years,” MIDF Research said.
Meanwhile, UOB Kay Hian Research (UOBKH) noted that Lok Kawi is strategically located around 9km from the Kota Kinabalu International Airport and 16km from Kota Kinabalu, Sabah.
“The project also will enhance WCT’s property development portfolio in East Malaysia. The company previously developed the d’Banyan Residency @ Sutera in Kota Kinabalu. We make no changes to our earnings and target price of 93 sen, pending further information from the management. We maintain our buy call,” UOBKH said.
PublicInvest Research said in its note that it is difficult to gauge the potential earnings contribution from the latest project at this juncture as there are not much details available such as the size of the required two parcels and its estimated gross development value.However, PublicInvest, which rates WCT “neutral” with a target price of 58 sen, said it is positive over this development as it would enable the group to enhance its landbank with a strategic development land in Sabah, without incurring a substantial upfront land cost.