Resolution on WCT’s Middle-Eastern project

PETALING JAYA: WCT Holdings Bhd’s long-drawn dispute over a Dubai racecourse project that dates back to more than a decade finally sees a resolution.

This came after a judicial committee had upheld the Dubai Court of Appeal’s decision that recognises a final award of RM1.2bil in favour of the company in its dispute with Meydan Group LLC over the Nad Al Sheba Dubai Racecourse project.

With this, the engineering, construction and property development group stands to receive RM1.2bil in compensation, which is higher than its market cap of RM709mil based on Friday’s 50 sen closing price.

But some think that it may be too early to cheer.

“The development clears matters on a long-standing discord, but the issue is can WCT collect the said amount, ” said one analyst.

If successful, it is a re-rating for the stock with monies that could go towards paring down debt and ongoing projects, said the analyst.

In its filing with the stock exchange, the company said it will continue to pursue its legal rights in respect of the final award.

Back in 2007, WCT, together with its 50-50 joint venture (JV) partner Arabtec Construction LLC, had won a US$1.3bil (at that time RM4.6bil) contract to build the project in Dubai.

However, in January 2009, WCT announced that the JV with Arabtec had been given a cancellation notice by Meydan relating to the construction of the premier racecourse project. WCT and Arabtec had contested Meydan’s move in 2009 to terminate its contract.

In 2015, the Dubai International Arbitration Centre ruled that Meydan’s cancellation and purported termination of the contract was unlawful, invalid and of no effect.

Not unlike other construction companies, WCT’s earnings have been impacted by the slowdown in construction and property activities following the outbreak of Covid-19 last year. Its third-quarter financial year 2020 (3Q20) results came in below expectations, with net profit contracting 88% year-on-year (y-o-y) to RM9.2mil, while core earnings fell about 80% y-o-y to RM10.1mil for the nine-month period.

For 2021, it aims to launch around RM1.2bil gross development value of property projects, according to a Kenanga Research report dated Nov 27,2020. These include the potential launch of Maple, Tower B in OUG, Hilltop 2 Mont Kiara, W City Condo, Johor and the Adenia Apartment, Klang.

Its construction arm is expected to get busier on the tendering front next year due to an expansionary Budget 2021, but near-term earnings remain challenging, said analysts.

As at 3Q20 ended Sept 30, WCT’s outstanding orderbook stood at around RM5.1bil, translating to a healthy cover ratio of 4.1 times. Its property sales saw a rebound to RM93mil in 3Q20 from RM26mil in 2Q20.

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