WHAT’S NEW

WCT Holdings has announced the Dubai Civil Court of Cassation (the highest court of appeal in Dubai) had dismissed the suit brought against it by Dubai-based Meydan Group LLC. This court case is in relation to WCT’s arbitration proceedings against Meydan in 2009 for the $1.3bil Nad Al Sheba Racecourse project in Dubai, of which Mayden’s cancellation was made on the ground of non adherence to the agreed time schedule for construction. Meanwhile, back in 2015, the Dubai’s tribunal has favoured WCT to seek for claim from Mayden with a sum amount of RM1.19b which includes claims for work done, repayment of performance bond, loss of profit, and legal cost. However, Mayden has yet to honour the payment.

COMMENTS

• We view the end of long debated saga positively as WCT could repatriate the substantial sum amount back to the company, of which would improves its overall company’s balance sheet. We expect the repatriation of monies from Mayden could take a while.
• In the best case scenario, assuming if the full sum amount could be repatriate less back to back amount due to subcontractors of RM270m, we expect WCT’s net gearing to drop to 0.6x (from 0.88x) while the enhancement in SOTP valuation is RM0.33/share (proceeds less carrying value in balance sheet of RM400m and back to back amount due to contractors of RM270m).
• No change to earnings forecasts.

RECOMMENDATION

• Maintain BUY and target price of RM1.12. Our target price is based on a 20% discount to our SOTP valuation of RM1.40/share and implies 9.5x 2019F PE (historical mean PE: 15x).

Source: UOB Kay Hian Research - 25 Jul 2018