Kenanga Research believes that the prospects for the group’s construction division in FY23 is more promising as “certain public projects at best will only come through in the first quarter of 2023.
PETALING JAYA: WCT Holdings Bhd
’s order book replenishment target of RM1bil for its financial year ending Dec 31, 2022 (FY22) is unlikely to be achieved due to delays on tender decisions following the 15th General Election (GE15), say analysts.
Kenanga Research in its report, however, believes prospects for the group’s construction division in FY23 is more promising as “certain public projects at best will only come through in the first quarter of 2023 (1Q23), namely a hospital construction and a flood mitigation project earmarked in Budget 2023.”
Sharing a similar view, Hong Leong Investment Bank (HLIB) Research said the award decisions for the federal government’s funded jobs could come in FY23 due to GE15 pending new cabinet line-up.
It noted that WCT’s tender book stands at RM9bil comprising the Mass Rapid Transit 3, hospitals, flood mitigation and commercial projects.
After removing WCT’s contract replenishment assumption, HLIB Research has cut its earnings forecasts for WCT by 2.8% in FY22 and 3.5% for FY23, respectively.
Meanwhile, TA Research in its latest report noted that WCT’s outstanding construction order book declined to RM3.8bil as of end-September, from RM4.1bil a quarter ago.
“Of the RM3.8bil outstanding order book, 65% is local building projects while the remaining 35% is local civil and infrastructure projects,” it added.
On WCT’s property development segment, both Kenanga Research and HLIB Research expect losses to narrow and eventually return to the black.
Kenanga Research also believes the group will report small profit under its property segment in FY23, as the segment will still be weighed down by hefty financing costs.
HLIB Research also expects the group’s property segment could turn profitable when construction progress at its Taman OUG project in Kuala Lumpur picks up.
“WCT’s only launch in FY22 is Adenia in August with a gross development value (GDV) of RM68mil.
“The company has a slew of projects carrying a collective GDV of RM2.75bil to be launched going forward,” noted HLIB Research.
According to TA Research, WCT’s property development division recorded sales of RM382mil as at end-September versus RM386mil in last year’s comparative period.
“Despite the healthy property sales, the property development division was still in a bleeding mode due to aggressive inventory clearing.
“Management has guided that the group will continue focusing on clearing the inventories in order to beef up the working capital,” TA Research added.
Most research houses also opined that the group’s retail mall and hotel businesses are recovering well, owing to the improved footfall and tenant sales as well as better occupancy rates.
Kenanga Research maintained its “market perform” call on the stock at a target price (TP) of 46 sen with no changes to its earnings estimates.
HLIB Research has a “hold” call with a TP of 50 sen while TA Research reiterated its “buy” call with a TP of 56 sen.
