WCT Holdings Bhd is shifting its strategy in 2023 onwards to target more infrastructure projects over buildings, in line with the foreseeable type of jobs that would be rolled out and also due to the higher margins from such projects.
In a report, MIDF Research said it likes WCT’s shift in strategy which favours infrastructure projects, allowing them to tap on the various roads and flood mitigation initiatives that were announced during the tabling of Budget 2023.
“This is also the right timing for the group to strengthen its foothold in East Malaysia as the government remains committed to developing Sabah and Sarawak, which would translate into more jobs,” said the research unit.
As of end-2022, the group’s outstanding order book comprised 35% local civil and infrastructure projects while local buildings made up 65%.
“WCT’s management intends to realign this to 70% infrastructure and 30% buildings,” said the research unit.
Meanwhile, the group has been intensifying its efforts to replenish its order book and now has over RM9bil of jobs in its tender book – about RM5bil of infrastructure jobs and RM4bil of building works.
As it did not manage to secure any jobs in 2022, WCT’s current outstanding order stood at RM3.53bil as at December 2022.
“About RM1.48bil or 42% of these projects are expected to be completed this year, escalating the urgency to win new jobs,” said MIDF Research.
WCT has a target to secure RM3bil of new jobs in 2023, or at least 30% of its tender book, which should be able to provide it with earnings visibility up to 2026.
Among jobs on its radar are flood mitigation projects, East Coast Rail Link and Mass Rapid Transit 3 packages and road projects in Sabah and Sarawak.
WCT also seeks to diversify overseas, so that its revenue is not overly reliant on jobs from Peninsula Malaysia.
It aims to have 15% come from overseas jobs such as in the Middle East and also 20% from the Borneo Island, where it is also seeking jobs in Kalimantan, besides Sabah and Sarawak.
“WCT’s decision to tap the Nusantara opportunities make sense due to the proximity as it already has the manpower and machinery in Sarawak as it is currently working on one of the portions of the Pan Borneo Highway,” said MIDF Research.
According to WCT, it would be easy to transfer their equipment over.
It is currently exploring opportunities with local players in Kalimantan on teaming up to take on infrastructure works there.
Regarding the Subang airport re-development, WCT is currently in advanced stages of discussion with relevant stakeholders.
MIDF Research pointed out that WCT is the concession holder of the airport and it hopes to have an active participation role in the redevelopment.
WCT is planning to submit a proposal to the Transport and Finance Ministries by end-March. WCT also expects stronger performance from its retail malls in 2023 on the back of high occupancy rates and higher footfall post-Covid.
“Improvement in margins can be expected as WCT has ended its rental rebates to help its tenants tide through the tough times since 2020,” said MIDF Research.
MIDF Research has raised its 2023 estimated revenue expectations for WCT by 2.7% to RM2.36bil and core earnings by 4.7% to RM77.9mil.
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