WCT Holdings to benefit from strong order book and property sales
28 November 2024
PETALING JAYA, 28 NOVEMBER 2024 - WCT Holdings Bhd will likely see improved prospects next year, underpinned by a healthy outstanding construction order book and unbilled property sales. Further, the impending listing of its Paradigm real estate investment trust (REIT) is expected to be a re-rating catalyst for WCT's shares.
In its report, CIMB Research noted that WCT's outstanding order book stood at RM2.9bil as of end-September 2024, which included two new mandates, namely PLUS lane expansion and common infrastructure works at Kwasa Damansara, translating into an order book/revenue cover of 2.6 times.
WCT's tender book is estimated to be worth in excess of RM13bil, while its property division is supported by unbilled sales of around RM1bil.
“Although the group is unlikely to meet its RM2bil win target for 2024, we believe that this is mainly due to a shift in the timeline for the Subang Airport Regeneration Plan, which may be finalised in 2025,” CIMB Research said.
“Other job prospects include the Penang light rail transit, the Penang International Airport expansion, Pan Borneo Sabah and most recently, the upgrading of Kota Kinabalu International Airport,” it added.
Year-to-date, WCT's new contract wins totalled RM464mil.
CIMB Research reiterated its “buy” call on WCT, with an unchanged target price of RM1.35.
It said the proposed listing of Paradigm-REIT, with more details likely to be unveiled by the first quarter of next year, is a strategic move that is expected to raise gross proceeds of RM1.4bil, and shore up WCT's balance sheet.
On the flip side, it argued, any delay in the proposed REIT could dampen sentiment on the company's stock.
TA Research said it viewed the proposed REIT positively, as the exercise could significantly reduce WCT's borrowings, potentially saving approximately RM50.1mil in annual interest expenses.
“WCT remains focused on monetising its three retail properties – Paradigm Mall Petaling Jaya, Paradigm Mall Johor Bahru and Bukit Tinggi Shopping Centre – via a REIT listing on the Main Market of Bursa Malaysia,” TA Research said.
Collectively valued at RM2.4bil, these properties would form the newly established “Paradigm REIT” which has already submitted its application for approval to the Securities Commission on Nov 19, 2024 and the listing is expected to be completed by the first half of 2025.
Paradigm-REIT will acquire the assets by issuing 1.6 billion new units at an assumed price of RM1 and making a cash payment of RM837mil.
TA Research maintained its “buy” call on WCT, with a lower target price of RM1.53, down slightly from RM1.54 previously.
This came after the research house reduced its earnings forecasts for WCT for 2024 to 2026.
WCT posted a net profit of RM173.22mil in the third quarter ended Sept 30, 2024 (3Q24), from a net loss of RM13.54mil in 3Q23, while its revenue decreased to RM437.46mil from RM496.56mil.
For the first nine months of 2024, WCT's net profit rose to RM220.63mil against a RM8.23mil net loss, while revenue fell to RM1.28bil from RM1.33bil a year ago.
Meanwhile, Hong Leong Investment Bank Research also reduced its target price for WCT, while maintaining its “buy” call on the counter.
The research house's revised target price for the counter stood at RM1.44, compared with RM1.50 previously.
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