Analysts keep 'neutral' call on WCT, cite REIT plan to unlock asset value

• Notably, WCT recently secured an external job consisting of a RM249.7 million package for the construction of additional lanes for the North-South Expressway on the stretch from Yong Peng to Senai in Johor.

KUALA LUMPUR (July 4): MIDF Research and Public Investment Bank (PublicInvest) kept their 'neutral' stance on WCT Holdings Bhd (KL:WCT), after the group announced plans to unlock its assets through a real estate investment trust (REIT).

MIDF Research raised its target price (TP) to 97 sen from 50 sen, while PublicInvest upgraded its TP to RM1.

“We lift our [annual] earnings estimates slightly by +13.3%/+16.7% to factor in stronger job wins, on the back of a stronger roll-out of government projects that are expected in the second half ending Dec 31, 2024 (FY2024).” said MIDF in a note on Thursday.

According to both PublicInvest and MIDF, WCT's proposed REIT will comprise retail properties owned by the group’s subsidiaries or joint-venture (JV) companies, as well as the disposal of the properties by the subsidiaries and JVs of their entire stake.

MIDF added that with total borrowings of RM3.15 billion as at March 31, the group was highly geared at 74.5% net.

This will allow the group to unlock the value of its investments, raise capital, and potentially enhance the liquidity and marketability of its property assets, said PublicInvest.

PublicInvest added that an estimated total of RM2.4 billion worth of assets will be injected into the REIT.

Notably, WCT recently secured an external job consisting of a RM249.7 million package for the construction of additional lanes for the North-South Expressway on the stretch from Yong Peng to Senai in Johor.

Therefore, MIDF expects an increased order book, which currently stands at RM3.2 billion.

The new development is expected to be completed in three years by June 2027.

Furthermore, WCT now has an active tender book of RM20 billion.

Assuming a conservative hit rate of 10%, MIDF opined that WCT may be able to secure RM2 billion of new jobs for FY2024.

Currently, the group owns the Bukit Tinggi Shopping Centre in Klang, Paradigm Mall in Petaling Jaya, Paradigm Mall in Johor Bahru, as well as two airport malls, namely gateway@KLIA2 and SkyPark Terminal in Subang.

A reported 23% year-on-year increase in operating profit to RM121 million for FY2023 was attributed to the group’s retail properties, said PublicInvest.

The research house also stated that the increased profit was driven by higher occupancy and rental rates for WCT's malls, and higher fair value gain on its investment properties.

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