News WCT
(“WCTB”) has announced a corporate reorganisation exercise by proposing to
transfer the listing of its shares into a new investment holding company called
WCT Holding Berhad (“WCTH”). The proposed reorganisation exercise is expected
to be completed by the 2nd quarter of 2013.
Comments The
proposed exercise requires WCTB to exchange all of its issued and paid up
ordinary shares with WCTH shares on the basis of 1 share in WCTH for every 1 share
in WCTB. This is also extended to WCT’s existing warrant B and C as well as its
proposed warrant D. These warrants are to be exchanged with WCTH’s warrant B, C
and D. In addition, WCTB’s shares (100%) in WCT Land (“WCTL”) will be transferred
to WCTH for a price consideration of RM485m (based on WCTB’s cost of
investment).
We are pleasantly
surprised with the announcement and we expect the reorganisation to provide
investors with a clearer organisation structure and business profile of WCT via
WCTH. We think that this is necessary as WCT embarks into the next level of its
business diversifications in its property investment and property development
as well as concession businesses. We also do not discount that this exercise could
be a prelude of WCT Land re-listing in the future.
Outlook We are surprised that the RAPID project awards
are already at their advance stages following the Phase 1 (site preparation
work) contract award to Gadang Holdings Berhad (GADANG, Not Rated) last week. Based
on the news, as quoted by GADANG, the contract could be worth more than
RM300m.
This is a positive
development for WCT as it is likely to secure one of the contracts in the near
term. The contract value for the earthwork package could be worth up to RM1.0b.
Based on its available capacity (up to RM2.0b worth of
construction/earthworks), WCT remains as a strong contender.
Forecast No changes in our FY12-13E estimates.
Rating Maintain
OUTPERFORM
We are maintaining
our OUTPERFORM recommendation on WCT, which offers an attractive upside (+14%)
from the current price.
Valuation No
changes in our TP following the reorganisation plan. Our TP of RM3.09 is based
on a SOP valuation.
Risks Delays in its ongoing projects and the award
of ETP based projects.
Source: Kenanga
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