PETALING JAYA: The arbitration claim against WCT Holdings Bhd may have a long-term impact on the company’s earnings, assuming, in the worst-case scenario, it gets dragged over an extended period of time.
AmInvestment Bank, in a report yesterday, said the arbitration could drag on for years.
The research house also noted that when a decision is finally handed down, it still remains to be seen if the award is enforceable or if the counter-party would honour the award.
“A case in point is WCT’s arbitration proceeding against client Meydan Group LLC in relation to the cancellation of the Nad Al Sheba Racecourse project in Dubai, UAE.
“First commenced in 2009, WCT only received an award of Arab Emirates dirham or AED1.15 billion (RM1.2bil) six years later in 2015.
“However, at present, two years after the award, Meydan Group LLC has yet to pay up,” it noted.
WCT is involved in construction and property. Its shares closed 14 sen lower at RM1.95 yesterday.
Commenting on the present arbitration case, AmInvestment Bank said it was unable to determine if WCT had a strong case (in the absence of the facts of the case and legal expertise).
“However, if WCT were to lose the latest arbitration, the amount claimed (RM214.1mil) will erase the entire and 70% of our 2017 and 2018 forecast earnings for WCT, respectively.
“The total loss per share is 12 sen on a fully diluted basis.”
Hong Leong Investment Bank (HLIB) Research, meanwhile, said a worst-case scenario could result in the research house reducing its 2017 earnings forecast of RM121mil to a loss of RM93mil.
“However, we would treat this arbitration claim as an exceptional item, and hence, leave our core earnings forecast unchanged.
“Furthermore, arbitration proceedings are usually a long-drawn affair.”
On Monday, three companies filed a claim for 181.57 million riyals (RM214.1mil) from WCT over payment for a government project in Doha, Qatar, where it was the main contractor. WCT said the claimants were its subcontractors for mechanical, electrical and plumbing-related works for the Interior Ministry headquarters project in Doha.