PETALING JAYA: Downward pressure piled up on WCT Holdings Bhd’s shares after the company lost its arbitration case last week.
The counter ended four sen, or 9.4% lower, at 38.5 sen yesterday amid the broad market downturn. The construction and property company was ordered to pay total of 132.54 million riyals following an unfavourable final award ruling in an arbitration case ordered by the Court of Arbitration of the International Chamber of Commerce (ICC).
At least four research houses cut their target prices for WCT, with one downgrading the company’s shares to “sell” after the ruling was issued last Friday.
According to TA Research, unless WCT could overturn the arbitration outcome, the payment was expected to increase the company’s net gearing level by about 0.05 times. The brokerage noted as of end December 2019, WCT’s total debt was RM3.1bil, with a net debt position of RM2.5bil and net gearing level of 0.65 times.
TA Research also expected WCT to incur an additional provision of about RM116.0mil for the financial year ended Dec 31,2019, which could result in a full-year loss of RM27.6mil, instead of a net profit of RM88.8mil announced previously.
It downgraded the stock to sell from “hold, ” with a lower target price of 45 sen, compared with 70 sen previously. “On top of construction contract drought, challenging property market, political instability and nation’s fiscal constraints, the outlook for WCT has deteriorated further since we (last) revised our target price on March 3, ” TA Research said.
“Unexpected plunge in crude oil price, a surge in Covid 19 cases both internationally and locally, and unfavourable outcome of the above arbitral tribunal outcome have resulted in much more challenging operating environment for WCT, ” it added.