WCT Berhad - Acquires another piece of land in Medini

News   WCT announced that it had acquired a piece of land measuring 18.12 acres in Medini, Iskandar Johor for a cash consideration of RM99.4m.   

  

Comments   This is the third land bank acquisition and the largest in size by WCT in the Medini area. Its two earlier land banks here in Iskandar are progressively being developed already as (1) 1 Medini Residences (11 acres) and (2) Medini Business District (10 acres). 

 The newly acquired land is earmarked for a mix commercial development with an estimated GDV of RM1.5b and is planned to be launched by 3Q13. 

 The development is expected to have up to 2.7m sft of GFA. Based on the acquisition price, the land is valued at RM36.01 per sft or 3% higher than the last transacted price in Medini i.e. Mah Sing’s acquisition price at RM34.90 per sft. In our opinion, the price tag is fair considering the rapid development in the Iskandar region and the high take-up rate on its current 1 Medini Residences project. 

 All in, we are positive on this acquisition and we believe that it is the right time for WCT to expand its property exposure in the Iskandar area.       

  

Outlook  We believe that WCT will be able to secure the earthwork job for TRX and RAPID in the near term. The combined value of both contracts could be worth up to RM2.0b. Other than that, with its ample capacity, we believe that WCT will be able to secure the sub-contract works for WCE Highway.  

  

Forecast  We have tweaked our FY13E higher by 6% as we impute in a higher contribution from its property division. 

  

Rating Maintain OUTPERFORM

 We are maintaining our OUTPERFORM recommendation for WCT, which offers an attractive upside (+16%) from the current price. 

  

Valuation   We have increased our WCT’s TP slightly by 3% to RM3.17 based on SOP valuation. 

  

Risks  Delays in its ongoing projects and in the award of ETP-based projects. 

Source:  Kenanga