UEM Sunrise-WCT JV for RM3b Selangor project a win-win deal

KUALA LUMPUR (Dec 2): UEM Sunrise Bhd and WCT Holdings Bhd's planned RM3 billion property development in Selangor is expected to help UEM Sunrise diversify from its Johor-centric projects and cut WCT's debt.

Hong Leong Investment Bank Bhd said in its reports today the joint venture (JV) would enable WCT to reduce its net gearing from 77% to 68%.

On UEM Sunrise, Hong Leong said: "Currently, Johor landbank remains the bread and butter for the company and represents more than 70% of total landbank."

Hong Leong maintained its "sell" call on UEM Sunrise shares with an unchanged target price (TP) of 94 sen "to reflect risk of Johor concentration". Hong Leong kept its "hold" recommendation on WCT with a TP of RM1.41.

UEM Sunrise saw its shares rose as much as five sen or 4% to RM1.18.

At 11.07am, the counter was traded at RM1.16 for a market capitalisation of RM5.26 billion.

The stock saw some five million shares traded.

WCT's share price was flat at RM1.50 at 11.08am giving it a market value of RM1.79 billion with 705,600 shares changing hands. The stock pared gains from its highest point at RM1.52 so far today.

Yesterday, UEM Sunrise and WCT announced that both companies intended to embark on a mixed development project on 243ha (608.63 acres) of freehold tracts in Serendah, Selangor.

UEM Sunrise proposed to pay RM214.88 million to acquire a 50% stake in Jubilant Courtyard Sdn Bhd (JCSB) from WCT.

Land owner JCSB is currently a wholly-owned subsidiary of WCT. Upon completion of the stake buy, UEM Sunrise and WCT will own 50% each in JCSB.

Following the JV announcement, Kenanga Investment Bank Bhd believes UEM Sunrise's privatisation was unlikely in the near term.

Kenanga said today that keeping UEM Sunrise listed would allow the company to raise funds for landbanking opportunities.

"If the group go for any sizeable acquisitions in the Klang Valley or Australia, we believe cash calls may be necessary," Kenanga said in a report. -- theedgeproperty.com