MARC has affirmed the long and short-term ratings of WCT Engineering Berhad’s (“WCT’s”) Islamic Fixed Rate Serial Bonds of RM100 million and 7-year Islamic Commercial Papers/Medium Term Notes Programme of up to RM100 million (“Islamic CP/MTN”) (collectively known as Islamic Securities or IS) at A+ID and MARC-1ID /A+ID respectively with a stable outlook. The ratings reflect WCT’s proven track record in both the international and domestic construction sectors and the consistent performance of its property development division, anchored by the success of its Bandar Bukit Tinggi Township in Klang. WCT has demonstrated its ability to manage risks associated with its overseas projects relating to operations, supply, and labour. Additional support is derived from WCT’s strong financial profile, aided by cash and bank balances of RM374 million and RM1.1 billion in unutilised banking facilities as at 31 May 2006. Moderating factors are the weak domestic construction sector and softening property market outlook.

For the year under review, WCT has successfully completed a few sizeable construction projects abroad such as The Durgapur Expressway and Panagarh-Palsit Highway in India and North Manama Al-Seef Flyover in Bahrain. These successful accomplishments have given WCT a foothold in the construction sectors of the Middle East and India and augur well for the company’s ability to secure further contracts going forward as evidenced in late 2005 and early 2006, when WCT secured contracts such as the design and construction of the New Doha International Airport in Qatar, the construction of the Dukhan Highway from Shahaniya to Zekreet in Qatar and the design, construction and maintenance of the Bahrain City Centre Project.

In light of the challenging cost environment facing the construction sector in the face of high oil and commodity prices, WCT has countered this scenario by negotiating and securing higher margin construction projects domestically and overseas while concurrently diversifying its property developments outside of Klang to prime areas such as Kelana Jaya and Sutera Harbour. The group has continued to replenish its order book by securing sizeable contracts domestically and overseas especially in the booming Middle East construction sector.

Despite the unfavorable domestic market conditions in FY2005, WCT`s financial results remained intact with revenues marginally higher at RM816 million (FY2004:RM796 million) and profit before tax amounting to RM129 million (FY2004:RM67 million). The marginal improvements reflect WCT’s commendable operational efficiency, which is also reflected by an increase in its operating profit margin to 16.4% from 15.9% previously. As at 31 May 2006, WCT’s order book stood at RM4.14 billion with an outstanding balance of RM2.98 billion yet to be recognised. This is sufficient to sustain its construction activities over the next two years. Currently, overseas contributions to the group’s order book are approximately 41%.

Following the completion of all WCT’s tollway projects in India last year, tolling has commenced on the Tada-Nellore Highway concession while the Panagarh-Palsit Highway and Durgapur Expressway concessions have started receiving semi annual payments from the National Highway Authority of India. All three tollway concessions, which are held through joint ventures; are expected to generate a steady source of income for the group.

WCT’s projected cash flows were subjected to several stress tests and are able to take cash reductions of up to 20% before the debt service coverage ratio weakens slightly to a minimum of 1.44 times as compared to the base case of 1.70 times, indicating that the projected cash flows can comfortably cover the company’s debt servicing obligations.

WCT derives its financial flexibility from its performance record and prudent cash management which has allowed it to secure adequate funding from financial institutions. As at 31 May 2006, WCT’s total funding lines stood at RM2.1 billion of which RM1.1 billion remain unutilised.

Key challenges however remain in maintaining favourable take-up rates for newly launched parcels at its Bukit Tinggi Township, maintaining its order book going forward, and strengthening its competitiveness.