WCT market worth may top RM4b post-consolidation: AmInvestment

PETALING JAYA: WCT Holdings Bhd could potentially double its market capitalisation to above RM4 billion via the consolidation of Malton Bhd and Tan Sri Desmond Lim’s private business ventures into the group.
AmInvestment Bank Bhd, which maintained its “hold” call and fair value of RM1.86 on WCT, said the exercise would make it more investable with local and foreign institutional investors.
“Consistent with market speculation, controlling shareholder Lim does have the intention to turn WCT into his flagship public-listed property development company,” AmInvestment Bank said in a report yesterday, following a recent meeting with the group’s new management.
“We understand that the new management has already started to explore options to bring Lim’s other public-listed company, Malton, and private business ventures (including upscale integrated property developments Pavilion Kuala Lumpur and Pavilion Damansara Heights) into WCT’s fold,” it said.
The estimated combined equity value of these entities are at least RM2 billion, comparable to WCT’s current market capitalisation of RM2.2 billion.
Last week, WCT announced a proposed placement of up to 125 million new WCT shares, equivalent to about 10% of its existing share base, at an indicative issue price of RM1.70 per share. WCT plans to use the RM120 million in net proceeds to pare down borrowings and fund working capital of its construction and property projects.
“Based on our estimates, the proceeds will reduce WCT’s net debt and gearing of RM2.4 billion and 0.88 times as at end of 3QFY16, to RM2.2 billion and 0.75 times respectively, while the new shares will dilute its FY17F EPS by 4.9%,” said AmInvestment Bank.
It added that the target placees will primarily be “strategic investors” who are parties “friendly” to the controlling shareholder and WCT did not rule out the possibility of the new shares going to institutional investors or Lim himself.
Similar to its previous management, WCT’s new management said that disposal of shopping malls will be an integral part of its de-gearing exercise. However, it advocates an outright sale of the shopping malls.
WCT aims to kick start the transaction within the next six months. Given the common controlling shareholder, the market expects Pavilion REIT to emerge as the buyer for Paradigm Mall in Petaling Jaya and BBT Shopping Mall in Klang.
The new management is also reviewing WCT’s landbank and plan to sell parcels that are considered “non-strategic” if the prices are right, including parcels in Bandar Bukit Tinggi in Klang, Rawang and Serendah which are estimated to have a total market value in excess of RM1 billion.
“However, it will retain those in the heart of the Klang Valley comprising the 60ha land in OUG and 2ha plot in TRX,” said AmInvestment Bank.
For the land in OUG, the new management plans to slowdown the project as it is located close to Malton’s Bukit Jalil City project. However, it is also mindful of the substantial holding cost for the OUG land, where the carrying value has ballooned to about RM700 million.