WCT-led joint venture wins RM1.2bil contract in Qatar

KUALA LUMPUR: A joint venture (JV) headed by construction firm WCT Holdings Bhd has bagged an RM1.2bil contract in Qatar’s capital Doha to build roads, utilities and underground car parks there.

In a filing with Bursa Malaysia, WCT said its 70:30 JV with Al Ali Projects Co (WLL) had accepted the contract from Lusail Real Estate Development Company for the whole project.

It said the scope of works for the contract includes construction of the commercial boulevard, main and internal roads, utilities, five small-sized light rail transit stations and four two-level underground car parks. The works are expected to be completed in the second quarter of 2017.

“The contract is expected to contribute positively to the group’s future earnings and net assets,” WCT said.

Despite this being WCT’s first job win for the year, Hong Leong Investment Bank (HLIB) Research said the sheer size (RM847mil based on WCT’s 70% stake) has led to its full-year target of RM800mil being met.

The research house said WCT had been bidding for this job since last year, but its award had been delayed a couple of times due to changes in work scope, resulting in re-tenders.

“With this job at hand, we estimate WCT’s orderbook to stand at RM2.8bil. This increases its order book cover (against financial year 2014 construction) from 1.6 times to 2.3 times, providing a much clearer degree of earnings visibility compared to previously,” HLIB Research said.

In addition, HLIB Research has raised WCT’s FY15 order book replenishment target to RM1.2bil from RM800mil, implying another RM353mil worth of new job wins to materialise this year. It has also raised construction margins to reflect this new contract, as the research house understands that margins are higher for its Middle-Eastern jobs vis-à-vis domestic ones.

“This contract provides WCT the much-needed order book replenishment. WCT’s burn rate has exceeded its order book replenishment in three out of the past four years. We have upgraded WCT to ‘hold’ from ‘sell’ on improving earnings visibility following this sizeable win. However, this win merely makes up for pedestal job wins in the past,” it said.

However, CIMB Research has advised investors to “stay on the sidelines”. It said although the new contract reaffirmed management’s upbeat guidance on overseas contracts during its fourth-quarter results briefing, CIMB remained cautious about the group’s property development outlook this year, given the falling margin trend in FY14’s operating numbers.

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