WCT and UEM Sunrise kept at Hold by AmResearch

WCT and Bina Puri are among the more active contractors in Sabah over the past few years

KUALA LUMPUR: AmResearch is maintaining its earnings forecast for WCT and UEM Sunrise pending the finalisation of their joint venture to develop 608 acres of land in Serendah, Hulu Selangor with an estimated gross development value of RM3bil.

It said on Wednesday its fair value for WCT was RM1.58 and UEM Sunrise at RM1.16.

WCT’s unit Jubilant Courtyard Sdn Bhd (JCSB) had on Tuesday signed a conditional subscription and shareholders agreement with UEM Sunrise. 

Under the agreement, UEMS will take up a 50% stake in JCSB for a consideration of RM215mil. With this, WCT's effective stake in JCSB will also be halved to 50%. 

JCSB is the beneficial owner of some 608 acres of land in Serendah, Hulu Selangor. 

“Based on the divestment of a 50% stake for RM215mil, the implied land cost is approximately RM16psf.  Roughly 10% or RM25mil of the purchase consideration will be paid upon the signing of the sales and purchase afreement. The balance 90% or RM193mil will be paid within three months from the unconditional date of the agreement,” it said.

The whole deal is to be completed by the second quarter of 2016. 

“We understand that JCSB has been earmarked as the vehicle to spearhead the development of an integrated, mixed used project with an indicative GDV of RM3bil. It is located about 30 minutes from the KL city centre. However, contributions will not be immediate - the project is only slated to kick off by end 4Q 2017. The development covers 10 years over 10 phases. 

“We believe WCT's latest move to pare down its stake in the Serendah land will help improve its FY16F net gearing ratio to 74% from 81% currently. Despite a lower effective 50% stake in the land, we also estimate WST’s FV to marginally increase to RM1.59/share (current: RM1.58/share) owing to a higher indicative GDV of RM3bil (our current assumption: RM1.2bil). 

“As for UEM Sunrise, this project is reflective of the groups' ongoing move to diversity beyond its landbank in Nusajaya. This translates into a marginal increase in its fair value to RM1.17 (currently: RM1.16/share), although FY16F net gearing will rise (from 14% to 17%),” said AmResearch.