HLG: WCT - H108 results in-line; Maintain BUY (15 August 2008)

WCT Berhad BUY



Price target RM3.80



Share price at 14 Aug RM3.10



Investment summary
H108 net profit grew +65% yoy on recognition of Middle East jobs. We remain positive on WCT due to the mismatch between its share price (-25% YTD) and increasing exposure to Middle East petrodollar-fuelled construction: (1) Construction win-rate has risen from RM800m in FY05 to RM3.9bn in FY07, vs. FY07 billings of RM2.4bn. (2) 24% EPS CAGR over FY07-10E translates into a 10-20% PE discount to Gamuda/IJM. (3) Market bearishness over local job prospects are overdone, especially for genuine apolitical contractors such as WCT. We are positive on the Malaysian construction sector and believe government job-flow may pick up: (1) pump-priming is an obvious and politically easy policy action in addressing the on-going external macro-economic slump; (2) recent building material market liberalization and fiscal-boosting fuel price hikes hint at this direction.



Lookout for new jobs

H108 results continue to show strong growth from the Middle East. We think share price should rebound on new Middle East construction wins in H208. Stock is still trading at 10-20% discount to Gamuda/IJM.