WCT: Operational Efficiencies Underpin Results, Investment Bank Affirms Buy Rating with Upgraded Target

A recent investment bank research report indicates that while headline net profit experienced a significant decline, core earnings largely met expectations, supported by strong operational improvements and strategic cost control measures. The financial results for the fourth quarter of fiscal year 2025 (4QFY25) saw headline net profit tumble 82.6% year-on-year to RM10.0 million, primarily due to the absence of one-off fair value gains on investment property and a deferred tax reversal recorded in the prior year’s corresponding quarter. Stripping out these non-core items, core net profit still contracted by 47.6% YoY, bringing the cumulative 12-month FY25 core earnings to RM47.8 million. These results were in line with the bank’s expectations but fell below consensus estimates.

Performance Highlights

Revenue for 4QFY25 decreased 14.2% YoY to RM465.4 million. This was mainly attributed to a significant decline in the engineering & construction (E&C) segment, which saw a 39.9% YoY drop as several projects reached advanced stages of completion. Additionally, the property investment and management (PIM) segment reported a 27.4% YoY lower share of revenue due to reduced ownership following the listing of its Paradigm REIT.

However, these declines were partially offset by robust performance in the property development (PD) segment, which saw a strong 59.1% increase in revenue to RM209.8 million, driven by higher sales and billings. Critically, the E&C segment’s operating loss significantly narrowed from RM53.7 million to RM8.3 million. This substantial improvement is a direct result of the continuous implementation of enhanced project monitoring and stringent cost control measures. The PD segment also transitioned from an operating loss of RM0.1 million in 4QFY24 to a healthy operating profit of RM32.8 million in 4QFY25.

Future Outlook and Challenges

Looking ahead, the outstanding construction order book remains healthy, estimated at RM2.1 billion. However, the property sales have underperformed expectations, with year-to-date sales of RM599 million representing only 55.0% of the full-year target of RM1.1 billion. The report emphasizes that future earnings growth will largely depend on improving project execution, particularly as current profit margins remain below the industry average.

Furthermore, the housing market faces considerable headwinds, including affordability issues, a supply-demand mismatch, and broader economic challenges that could dampen consumer confidence and spending power. Despite these headwinds, the proactive cost management within the E&C segment highlights operational resilience.

In conclusion, the investment bank maintains its positive outlook, reiterating a Buy recommendation with a target price of RM0.25, suggesting a 25.0% upside from the last traded price of RM0.20.