BY P. ARUNA
WCT is also planning a real estate investment trust (REIT) listing for some of its property investment assets. The research house said the group’s plan was to inject its 70% owned Paradigm Mall and BBT Shopping Mall which is fully-owned, while its 70% owned gateway@klia2 mall concession is due for either a separate listing or to be injected into the same REIT. (Paradigm Mall Johor Baru).
PETALING JAYA: The potential listing of WCT Holdings’ construction arm could be an upward re-rating catalyst for its share price if shareholders are rewarded with a special dividend, according to Affin Hwang Capital Research.
This, it said, would be possible if shareholders were rewarded with a dividend-in-specie or special dividend similar to Sunway Construction Group Bhd’s (SCGB) listing exercise.
“Sunway’s share price outperformed the FBM KLCI by 29% when it listed SCGB last year. We took the share price performance starting from a month prior to the announcement of the proposal to list SCGB and ending on the completion date of the deal,” it said in a note.
The separate listing, it said, would also allow the group to capitalise on positive market sentiment on construction stocks.
The research house said the construction company remained one of its top country buys, and raised its target price to RM2.16 from RM1.84.
However, any premium realised from the listing may be limited, it said.
This is because WCT’s FY16E core fully-diluted price earnings ratio (PER) of 14.8x was only at an 11% discount to the weighted average construction sector PER of 16.6x currently, it said.
It is also at a premium to pure construction stock Sunway Construction Group’s PER of 13x. “Having said that, we believe the continued upcycle for the construction sector will drive PER expansion as news flow of contract awards accelerates,” it said.
WCT is also planning a real estate investment trust (REIT) listing for some of its property investment assets.
The research house said the group’s plan was to inject its 70% owned Paradigm Mall and BBT Shopping Mall which is fully-owned, while its 70% owned gateway@klia2 mall concession is due for either a separate listing or to be injected into the same REIT.
“The listing of its construction arm and mall assets would reduce the gearing of the group from the cash proceeds and the de-consolidation of debt in the mall assets if it only retains an associate stake in the REIT,” it said.
Affin Hwang is raising its core FY16-17 earnings per share forecast by 7% to 16% to reflect higher new contract assumptions.
It pointed out that the prospects to grow its order book were good due to the expected rollout of new large-scale infrastructure projects in 2016.
“WCT has been pre-qualified to bid for work on the RM28bil Klang Valley MRT Line 2 and RM16bil Pan-Borneo Highway (Sarawak stretch).
“WCT is also interested in bidding for work on the RM9bil LRT Line 3 and RM8bil Southern Double Track,” it said.
WCT shares traded 1.83% lower to RM1.61 last Friday.
Its market cap stood at RM1.92bil.
