KUALA LUMPUR: AmInvestment Research has maintained its Hold call on WCT Holdings with a fair value of RM1.91 based on sum-of-parts following WCT's proposed private placement of up to 10% of its existing paid-up share capital.
The placement of up to 140 million new shares at an indicative issue price of RM1.73 a share is expected to raise RM240.2mil in net proceeds. RM100mil of the proceeds is earmarked for debt repayment and the balance RM140.2mil for working capital purposes.
This is WCT's second private placement this year, which will not be viewed positively by investors, says AmInvestment Research.
Based on its estimates, the proceeds will reduce WCT's net debt and gearing of RM2.6bil and 0.86x as at end H1FY2017, to RM2.4bil and 0.72x, respectively.
"The new shares will only dilute our existing FY18F FD EPS forecast by 2% from 8.24 sen to 8.11 sen. This because the new shares will only increase WCT’s existing FD share base by 7.8%
(even though they will increase WCT’s paid-up share capital by 10%) and there will be interest savings from the proceeds," said AmInvestment Research.
It believes that WCT will be turned into a the flagship PLC of Tan Sri Desmond Lim, via the injection of Malton and Lim's private business ventures including Pavilion Kuala lumpur and Pavilion Damansara Heights, which could double WCT's market capitalisation to RM4bil.
"However, we believe it is premature to tell if the exercise will be value-enhancing to WCT’s existing shareholders, as that depends largely on the structure and pricing of the assets and new shares to be issued pursuant to the corporate exercise."
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