Divestment in gateway@KLIA2 to put WCT on stronger footing

CGSI Research said the stake divestment will result in a net gain after tax of about RM184mil, or 13 sen a share.

PETALING JAYA: WCT Holdings Bhd, which has divested a partial stake in Segi Astana Sdn Bhd, does not discount a longer-term game plan of an eventual listing of Segi Astana via a business trust.

This is so since the concession structure of gateway@KLIA2 may not allow for an injection into a real estate investment trust, according to CGS International Research (CGSI Research).

Segi Astana is WCT’s joint venture (JV) company with Malaysia Airports Holdings Bhd (MAHB). WCT’s partial divestment of its stake in gateway@KLIA2 to the airport operator comes with a concession extension until 2069.

The research firm said the stake divestment will result in a net gain after tax of about RM184mil, or 13 sen a share.

However, the transaction is non-cash in nature and arose due to the revaluation of the concession prior to the divestment.

Going forward, CGSI Research believes a major re-rating catalyst for the stock is the Subang Airport Regeneration Plan (SARP) and WCT is seen as one of the major beneficiaries.

SARP will transform Kuala Lumpur’s second airport into a regional aviation hub for narrow-body aircraft, with a maximum capacity of eight million passengers per annum (versus 1.5 million currently).

“That will come with a RM1.5bil to RM2bil construction contract and strong property sales,” it added. CGSI Research reiterated its “add” call on WCT with a target price of 68 sen a share.

It said given the muted Bloomberg consensus earnings expectations, any newsflow on new contract wins will trigger a rerating. The downside risks cited for its call on WTC are earnings disappointments and failure to clinch new contracts.

Back to Segi Astana, it was formed in 2010 via a JV between WCT Land (100% owned by WCT) and MAHB for the development of gateway@KLIA2, a retail mall connected to the Kuala Lumpur International Airport’s Terminal 2 (KLIA 2).

The partial divestment will see MAHB raising its stake in Segi Astana to 47%, while WCT’s equity interest will be diluted to 53% from 70%.

It said WCT also owns a 100% interest in the 86 million non-voting redeemable preference shares or RPS-A which were issued during the Covid-19 pandemic as a loan from WCT to Segi Astana in order not to breach key covenants of the concession agreement.

Connected to KLIA 2, the mall had a net lettable area of 378,000 sq ft and occupancy rate of 95% as at end last year.

Tenant sales in the fourth quarter of 2023 (4Q23) amounted to RM87mil, down 8% quarter-on-quarter, and 22% below that of 4Q19, prior to the onset of the pandemic. However, average spending per shopper of RM40 in 4Q23 was 19% higher than 4Q19’s level, CGSI Research said.