WCT attracts suitors


  • Business Premium
  • Saturday, 15 Sep 2018

Retail asset: WCT’s largest property is the 1.3 million sq ft (net lettable area) Paradigm Mall in Johor Baru.

Property developers, construction companies said to be eyeing a piece of the company

Construction outfit WCT Holdings Bhd is the cream of the crop in its industry, known for its expertise and ability to deliver projects on time or ahead of time, and within budget.

Apart from the group’s stellar expertise, WCT is rich in both assets and cash.

Hence, it comes as no surprise that property developers and construction players alike are eyeing to get a hold of WCT.

Then, in 2004, WCT, along with joint venture partner Cebarco WLL, completed the construction of the RM560mil Formula I racing circuit in Bahrain two days ahead of schedule.

This was despite major design changes and variations, which would typically grant the contractor an extension of completion time.

The group’s total net book value of properties and parcels of land amount to a staggering RM3.89bil.

Its largest property is the 1.3 million sq ft net lettable area (NLA) Paradigm Mall in Johor Baru, followed by eight parcels of land in the Petaling district, measuring a total of 62.56 acres.

As of June 30, 2018, WCT’s cash and cash equivalents amounted to RM473.04mil.

WCT trades at a price-earnings ratio of 6.63 times.

Compared to its closest peer, MALAYSIAN RESOURCES CORP Bhd (MRCB) trades at a PE ratio of 9.81 times.

WCT has a market capitalisation of RM1.19bil, while MRCB has a market capitalisation of RM3.1bil.

Currently, the largest shareholder in WCT is property tycoon Tan Sri Desmond Lim Siew Choon, who holds a 17.5% stake via Dominion Nexus Sdn Bhd.

Lim has a 28% stake in Pavilion Real Estate Investment Trust (REIT) and a further 41.2% stake in MALTON BHD.

Lim serves as WCT’s executive chairman, while group managing director is Datuk Lee Tuck Fook, who is also the executive director of Pavilion REIT Management Sdn Bhd.

According to WCT’s annual report 2017, the other top shareholders are Lembaga Tabung Haji at 8.17%, Amanah Saham Bumiputera at 5.6%, Employees Provident Fund (EPF) at 5.39%, and Retirement Fund Inc (KWAP) at 4.44%.

For the first half ended June 30, 2018, WCT posted a net profit of RM82.16mil, a 52% increase from the corresponding period last year.

This was mainly driven by the higher contribution from local infrastructure projects.

Net profit for the full financial year 2017 was RM154.6mil, more than doubled from the previous financial year.

The engineering and construction segment is the largest revenue contributor to the group, making up 73%, followed by property development at 23%, and property investment and management at 4%.

On a year-to-date basis, WCT has only secured one key construction contract – the RM555mil building job for Lendlease Projects (M) Sdn Bhd’s shopping mall in Tun Razak Exchange (TRX).

This contract brings WCT’s outstanding construction order book to RM5.8bil.

During an analyst briefing last month, WCT had reiterated its guidance for job wins of RM2bil in the current financial year.

However, analysts remain cautious on the construction sector as the government scales back on public projects.

AmInvest Research, in a recent research report, elaborates that there will be a shrinking pool of new jobs in the market, coupled with razor-thin margins for successful bidders as a result of severe undercutting among players.

“We believe WCT is mitigated by its substantial order backlog that should keep it busy over the next two to three years, coupled with its proven ability to compete under an open bidding system.

“Similarly, we are cautious on WCT’s other key businesses such as property development due to the prolonged downturn in the local property market, and property investment due to the oversupply of retail space in the market, coupled with e-commerce’s encroachment onto the brick-and-mortar shopping malls,” says AmInvest Research.

As for WCT’s de-gearing plans, Hong Leong Investment Bank Research opines that some of these initiatives may have hit a temporary snag.

WCT had proposed a 10% private placement last October, involving the issuance of up to 140 million new shares to raise some RM242mil.

This was after a private placement of 100.46 million new shares to select investors, which raised a total RM178mil in April.

Following the announcement of the second fundraising exercise for the year, WCT’s shares fell to a 12-month low at RM1.60.

As of yesterday’s close, WCT shares were traded at 83 sen apiece.

“The proposed 10% private placement is unlikely to proceed in the near term due to weak share price.

“For its real estate investment trust (REIT) proposal, we understand that it will be postponed to next year due to rising yields for REITs and AEON lawsuit for BBT Mall.

“The group also awaits for better rental numbers for Paradigm JB to eventually be included into the REIT,” says Hong Leong Investment Bank Research.

As of the first quarter of financial year 2018, WCT’s gearing ratio was 0.97 times.

 

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