PETALING JAYA: WCT Holdings Bhd
’s outlook appears promising as it prepares for potential growth, driven by its upcoming real estate investment trust (REIT) listing, robust order book and ongoing tender activities.
Analysts are largely optimistic, with research houses maintaining “buy” calls on the stock despite mixed views on near-term earnings visibility and construction margins.
MIDF Research upgraded WCT to a “buy”, setting a target price of 97 sen, citing its strong 2024 financial performance.
“The favourable macroeconomic backdrop, supported by resilient domestic investment, multi-year infrastructure projects and a recovery in tourism, presents additional tailwinds for growth,” the research house said in its report yesterday.
WCT posted a net profit of RM277.96mil for the financial year ended Dec 31, 2024, on a revenue of RM1.82bil, marking a significant turnaround from a net loss of RM254.15mil on a revenue of RM1.73bil in 2023.
However, MIDF Research noted that 2024’s outperformance included non-recurring gains, such as a RM184mil net gain from remeasuring its interest in a jointly controlled entity in the third quarter of last year (3Q24).
It highlighted challenges in WCT’s engineering and construction segment, which continued to face margin pressures from project delays and rising costs.
Despite this, WCT remained proactive in pursuing new projects, boasting a tender book exceeding RM13bil, with key bids that included the Penang International Airport expansion, Pan Borneo Sabah and expressway works.
A significant catalyst for WCT is its proposed REIT listing, comprising three retail malls, which is expected to unlock asset value and enhance financial flexibility, MIDF Research said.
“The group’s proposed REIT listing is expected to unlock asset value and enhance financial flexibility by raising funds to pare down its high borrowings,” it noted.
As of Dec 31, 2024, WCT’s borrowings stood at RM3.58bil, with a net debt-to-equity ratio of 0.80 times.
TA Research maintained its “buy” recommendation on WCT with an unchanged target price of RM1.53. The research house pointed out that as of end-December 2024, WCT’s outstanding order book stood at RM2.3bil, representing 2.2 times 2024 construction revenue.
“WCT’s strong tender book of approximately RM13bil, predominantly comprising civil and infrastructure jobs (92.3%) and housing-related projects (7.7%).”
Nevertheless, TA Research revised its 2025 and 2026 earnings forecasts downward by 10.6% and 20.6%, respectively, due to lower-than-expected job replenishment in 2024 and adjusted margin assumptions for certain projects.
Meanwhile, Hong Leong Investment Bank (HLIB) Research also has a “buy” call but lowered its target price to RM1.31 from RM1.44 based on a sum-of-parts valuation.
This adjustment followed a de-rating of WCT’s construction segment price-to-earnings multiple from 15 times to 12 times, aligning with peers with similar order book levels.
The proposed Paradigm-REIT, filed with the Securities Commission in November 2024, remained a critical catalyst for WCT, the research house added.
While the assets have been reclassified as held for sale in 4Q24, the REIT’s completion might extend beyond the initial 1Q25 guidance.
The REIT is independently valued at RM2.44bil and could net WCT cash proceeds of RM1.38bil, substantially reducing net gearing to 0.46 times from 0.80 times.
HLIB Research highlighted that WCT secured approximately RM960.7mil in new contracts in 2024, including internal projects at Adison West and East (RM497mil), PLUS highway upgrading works (RM249.7mil) and Kwasa infrastructure (RM214mil).
WCT’s property development and investment segments also performed well, with 2024 property sales hitting RM1bil.
