Lower earnings for WCT as construction, property revenues set to dip

By SHAHEERA AZNAM SHAH

WCT Holdings Bhd’s earnings are likely to dip in the near term on fewer new construction orders and marginal contribution from its property investment segment.

AllianceDBS Research Sdn Bhd revised downwards its earnings estimates for WCT’s financial years ending Dec 31, 2020 (FY20) and FY21 by 35% and 18% respectively.

“We expect lower new orders totalling RM300 million and RM1.5 billion for FY20 and FY21 respectively against RM1.5 billion and RM1.6 billion projected previously,” it said in a note yesterday.

This comes as the group’s construction division will be affected by the Movement Control Order (MCO), though its Mass Rapid Transit Line 2 and Pan Borneo Highway Sarawak projects are understood to have commenced in late March and early April respectively after obtaining approval.

“We also expect lower property investment income for the group as we expect it to continue giving rebates for its portfolio of malls,” the research house added.

It said the engineering and construction firm’s new order volume for FY20 will factor in the Pavilion Damansara Phase 2’s letter of award (LoA), which was obtained in March 2020. Net profit will be anchored by the construction division.

“With the conversion of its letter of intent to LoA for the RM1.2 billion Pavilion Damansara Heights Phase 2, WCT’s outstanding orderbook stands at RM6.2 billion, which is higher than the orderbook of IJM Corp Bhd and also Sunway Construction Group Bhd,” the research firm stated.

Its forecast assumes a balance of RM300 million new wins in FY20, which it sees as “achievable” despite the firm recording just RM119 million in new wins for FY19.

The group’s outstanding order- book consists of 56% infrastructure-related projects and 44% building jobs, while 95% are domestic jobs.

At present, its tender book amounts to some RM5.8 billion comprising RM3.6 billion of local building works and RM2.2 billion of civil and infrastructure works.

On land and property inventories, the group is expected to dispose of some RM200 million of unsold inventory and to sell RM150 million worth of land.

The firm sold a piece of land measuring 6.5 acres (2.63ha) in Klang for RM55 million in Decem- ber last year, which was recognised and settled in the first quarter ended March 31, 2020 (1Q20).

Its property pre-sales last year stood at RM322 million, compared to RM146 million the year before.

Unbilled sales currently stand at RM185 million, while unsold completed stock is at RM738 million.

For the retail segment, AllianceDBS expects the segment’s contribution to shrink as the group is providing rental relief for its tenants amid the Covid-19 outbreak.

“Retail revenue has held up for January and February, but naturally March will be affected by the MCO. WCT has thus far given some rental rebates and relief to its tenants, but is still mulling over whether to extend this to cover the whole MCO period,” it said.

The group operates five shopping malls, namely AEON Bukit Tinggi, Paradigm Mall Petaling Jaya, Gate- [email protected] 2, Paradigm Mall Johor Baru and Subang Skypark, with current occupancies of 90% to 100% for each mall.

AllianceDBS is keeping a ‘Buy’ rating on the company, albeit with a lower target price of 85 sen.

Shares of WCT jumped 5.43% or 2.5 sen to close at 48 sen yesterday, bringing its market capitalisation to RM680.33 million.