WCT Holdings Bhd slips deeper into the red in 4QFY23 at -RM245.6m, dragged by losses from its engineering and
construction segment. For the cumulative 12-month period of FY23, the group booked a net loss of -RM254.1m as compared to a core net profit of RM53.6m in FY22, broking house MIDF said this came below its own and consensus expectations.
Notably, the engineering and construction segment saw a revenue decline by – 21.8% to RM1.15b, delivering an operating loss of -RM219.8m as compared to an operating profit of RM47.7m in FY22. The weaker performance was due to slower construction progress and depressed margins due to prolongation and cost escalation for materials and labour. The lower margins resulted in a reversal of profits that would have been accrued on WCT’s ongoing projects.
While revenue from property development also declined by -19.8% to RM362.0m, its operating profit improved +12.5% to RM20.2m as the group actively cleared its unsold completed inventory, which saw a -54.7% reduction from RM380m in 4QFY22 to RM172m in 4QFY23. The group has a total unbilled sale of RM640m.
As for the property investment and management segment, the earnings anchor for FY23, generated an operating profit of RM121.4m though it came in lower by -22.9% despite a higher revenue of +17.7% to RM217.1m. The higher revenue is attributable to higher occupancy and rental rates in its malls while the lower operating profit was due to a higher fair value gain on investment properties in FY22.
WCT is in dire need of replenishment, it has been at least two years that WCT has not secured any new jobs and its order book is depleting every quarter. The outstanding order book is now at RM2.72b and RM355m of these projects are expected to be completed in FY24. Most of the projects are expected to be completed in FY25. The group has been actively bidding for jobs, with a tender book of more than RM12.0b.
Management has allocated more resources to secure new jobs, both in Malaysia and overseas. MIDF is slashing its FY24E core earnings estimates for the group by -8.0% to RM68.8m due to the lower-than-expected margins from engineering and construction
The house is revising its TP to RM0.49 from RM0.52, based on WCT’s FY24F EPS of 4.9 sen pegged to a twoyear mean PER of 10x and maintaining a neutral call on the stock.
