PETALING JAYA, FEB 17: WCT Holding Bhd’s degearing exercise, which includes monetising its land bank as well as the listing of its construction division and investment assets, is estimated to raise proceeds totalling RM1.5 billion.
The proposed listing of the investment assets and construction arm is targeted by end-2016, Public Investment Bank Research analyst Tan Siang Hing said following a recent meeting with WCT’s management.
The degearing exercise which is in progress with the recently-proposed joint venture (JV) with UEM Sunrise which is expected to raise RM215 million in net proceeds.
“We understand that the listing of its construction division and investment assets is expected to raise another RM1.3 billion, which would pare down the group’s net gearing from 0.6 times to 0.4 times. All in, the total proceeds from the degearing exercise are estimated to be RM1.5 billion or RM1.11/share,” Tan said in a note to investors yesterday.
The proposed injection of WCT’s 608.6-acre Bandar Serendah land into a new 50:50 JV with UEM Sunrise would see the latter injecting RM214.9 million of cash into the JV.
Tan explained that the de-gearing exercise will ultimately see WCT be the holding company owning the land bank and stakes in the new construction company and real estate investment trust (REIT).
“We understand that it plans to sell 40% of the c.RM1.5 billion construction IPO, potentially yielding RM600 million in cash proceeds. As for investment assets, the group plans to float its Bandar Bukit Tinggi Mall in Klang and Paradigm Mall Kelana Jaya with total asset value of RM1.2 billion.
“With 40% ownership, the REIT is projected to raise c.RM720 million. Both listings are expected to be completed by end-2016,” said Tan, adding that the Gateway@klia2 mall is excluded from the REIT listing.
With the potential value to be unlocked from the reorganisation, Tan upgraded WCT to “outperform” from trading “buy” with a higher target price of RM1.80 from RM1.70 previously based on 10% discount to our sum-of-the-parts (SOTP).
Tan added that WCT’s arbitration claim of RM1.3 billion against Meydan Group LLC in relation to the cancellation of the construction and completion of the Nad Al Sheba Racecourse in Dubai, UAE would potentially add another RM0.95 per share to his SOTP valuations.
He also adjusted WCT’s FY16-17 earnings by 11% and 6% respectively to account for higher job replenishment and rental income.
After securing a record RM3.1 billion worth of jobs last year, Tan said WCT is hopeful that it could add another RM2 billion in 2016, with RM1.6 billion expected locally and the rest from the Middle East.
“We understand that it will focus on infrastructure jobs which traditionally have higher margins,” he said.
Among the key jobs eyed are refinery and petrochemical integrated development project (Rapid) Pengerang civil works (RM300 million), TRX infrastructure and buildings (RM800 million), Kwasa Damansara civil and infrastructure works, KL118 infrastructure, Southern Double Track, Pan Borneo highway, LRT3 and MRT2 rail works.
He noted that WCT’s outstanding order book as at Nov 2015 stood at RM5.3 billion, with about RM900 million internal works.
On the property sales, he said, the group is targeting to sell RM600 million worth of properties in FY2016, with maiden launch of its OUG mixed development project, The Paradigm Gardens City.