WCT - Building its presence in Johor Buy

- Maintain BUY on WCT, with an unchanged fair value of RM3.05/share/share – pegged to a 15% discount on its sum-of-parts value.

- WCT has announced on Bursa Malaysia that its property arm WCT Land had entered into a conditional lease purchase agreement with Medini Land –a wholly-owned unit of Iskandar Investment Bhd (IIB) – worth RM99mil. 

- The land measures 18-acre acres and is situated in Medini North, within the Iskandar Development Region. Based on a gross floor area of ~2.8 mil sq ft, the implied land cost for WCT works out to RM36 psf. 

- We believe the acquisition price is fair – as it is close to the RM34.90 psf that Mah Sing Group paid for land in Medini (total: RM75mil for 8.2 acres) in a similar deal with IIB just last month.

- WCT’s management was quoted in press interviews that plans are afoot to kick-start the mixed commercial development (estimated GDV: RM1.5bil) project by 3Q13 for completion in five years. We gather that WCT plans to go upmarket with this project.

- This is the second landbanking deal that WCT has embarked on in Medini after the recent acquisition of a 10.3-acre parcel within the 142ha (~352 acre) Medini Business District, located next to Medini North.

- WCT had also in August acquired a 12-acre plot of land that includes the abandoned Kemayan shopping mall in Tebrau (NLA: 770k sq ft) for RM180mil.

- Meanwhile, sales at its maiden property project in Medini (1 Medini) has been encouraging – with an average take up rate of 69% in 1HFY12 (2QFY12: 70%). Average selling price for Phase 2 has moved up to ~RM550 psf from RM450 psf under Phase 1. 

- Being an early mover in Iskandar – and Medini in particular – we believe WCT is well-positioned to ride on the recent surge in property development activities within Iskandar Malaysia.

- Taken together, this would boost the outstanding GDV of its property projects in Johor to ~RM3.6bil and bump up the total GDV of its property business to circa RM13.4bil.

- We make no changes to our fair value and assumptions pending more details on this latest project.     

Source: AmeSecurities