Investment Highlights

• We maintain our forecasts, FV of RM1.91 based on sum of parts (SOP) (Exhibit 1) and HOLD call.

• WCT has proposed a private placement of up to 140mil new shares, translating to about 10% of its existing paid up share capital, at an indicative issue price of RM1.73/share. WCT expects to raise RM240.2mil net proceeds from the exercise, of which RM100mil is earmarked for debt repayment while the balance RM140.2mil for working capital purposes.

• This is the second private placement WCT has undertaken this year. Recall, WCT in Jan 2017 proposed a private placement of up to 125mil new shares. In April 2017, it managed to place out 100.5mil new shares at an issue price of RM1.77/share, raising gross proceeds of RM178mil. However, it failed to place out the remaining 24.5mil new shares before the approval lapsed.

• We believe that WCT is not offering much comfort to investors by coming to the market for funds, twice, in less than a year.

• Based on our estimates, the proceeds will reduce WCT's net debt and gearing of RM2.6bil and 0.86x as at end- 1HFY17, to RM2.4bil and 0.72x respectively.

• Also, based on our calculation, the new shares will only dilute our existing FY18F FD EPS forecast by 2% from 8.24sen to 8.11sen. This because: (1) the new shares will only increase WCT’s existing FD share base by 7.8% (even though they will increase WCT’s paid-up share capital by 10%); and (2) there will be interest savings from the proceeds.

• We maintain our view that WCT will ultimately be turned into the flagship PLC of Tan Sri Desmond Lim, via the injection of Malton (a sister company of WCT, with its prized asset being Pavilion Bukit Jalil) and Lim’s private business ventures including Pavilion Kuala Lumpur and Pavilion Damansara Heights. This could potentially double WCT’s market capitalisation to above RM4bil.

• However, we believe it is premature to tell if the exercise will be value-enhancing to WCT’s existing shareholders, as that depends largely on the structure and pricing of the assets and new shares to be issued pursuant to the corporate exercise.

Source: AmInvest Research - 17 Oct 2017