CIMB Securities widens WCT's discount as order book challenges mount, keeps 'hold' call

• The downward revision in forecasts is mainly driven by the potential review of the Subang Airport Regeneration Plan (SARP), following the takeover of Malaysia Airports Holdings Bhd (MAHB) by the Gateway Development Alliance consortium.

KUALA LUMPUR (April 18): CIMB Securities has widened the valuation discount for construction and property group WCT Holdings Bhd (KL:WCT), citing growing uncertainty over its order book.

CIMB Securities has revised down WCT’s projected new contract wins for FY2025 to FY2027 by 17% to 50%, now estimated between RM500 million and RM1 billion. It also trimmed core net profit forecasts by 3% to 5%, adopting a more conservative stance on the group’s immediate order book outlook.

Additionally, "the group has not won any major new contracts year-to-date," CIMB Securities said and maintained its "hold" call on the stock. "As order book uncertainty grows, we also widen WCT’s discount to its sum-of-the-parts (SOTP) [valuation] to 70% from 60%,"

CIMB Securities has lowered its target price for WCT to 70 sen from 87 sen. The stock is currently trading at a price-to-book ratio of 0.3 times, in line with its historical mean. WCT's share price, which has fallen by nearly 35% year-to-date, opened flat at 62 sen on Friday.

The downward revision in forecasts is mainly driven by the potential review of the Subang Airport Regeneration Plan (SARP), following the takeover of Malaysia Airports Holdings Bhd (MAHB) by the Gateway Development Alliance consortium.

"We believe that a reassessment of the SARP’s roadmap may cap the growth potential of Subang Skypark Sdn Bhd, a 60%-owned subsidiary of WCT, in the near term," the research house said. Additionally, "AirAsia recently announced the relocation of its domestic services to Kuala Lumpur International Airport Terminal 2, effective April 7, 2025."

WCT holds a key stake in the SARP through a 30-year sub-concession agreement with MAHB, which is set to expire on Dec 3, 2027, with an option to extend for another 29 years.

"Subang Airport complements KLIA — Malaysia’s main gateway — which will remain the priority," the research house said. Under its original SARP plan, Subang Airport is slated to increase its passenger handling capacity to five million over the next three to four years, with a longer-term target of reaching eight million passengers by 2030.

SARP has an estimated budget of RM3.7 billion over 10 years. It includes the redevelopment of infrastructure, the creation of new spaces for high-value maintenance, repair, and overhaul services, as well as the expansion of the business aviation area. The plan will also add nearly four million square feet of lettable gross floor area, which is approximately 2.3 times its current size.

On a brighter note, WCT’s balance sheet is expected to improve with the planned listing of its Paradigm Real Estate Investment Trust (Paradigm REIT), which remains on track. Slated for the second quarter of 2025, the REIT listing is projected to reduce the group’s pro forma net gearing to 47% from 92%, according to the research house.

There are now six 'buy', one 'hold' and one 'sell' calls out of eight research houses covering WCT. The average target price is RM1.06, according to Bloomberg, suggesting a potential return of up to 71% in the next 12 months from the last price.

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