- We maintain our BUY call on WCT Holdings with an unchanged fair value of RM2.68/share – pegged at a 15% discount to its sum-of-parts value. WCT announced that its wholly-owned unit, WCT Land has entered into a conditional SPA with Matad Sdn Bhd for the acquisition of land in Serendah, Selangor for RM115mil.

- The freehold land measures ~221 acres. It is being earmarked for a mixed commercial development.

- The purchase consideration is RM115mil, valuing the land at ~RM12psf. By extension, the implied land value of WCT’s latest land deal is approximately six times the ~RM2psf price that the group had paid for a larger parcel of land in Serendah back in 2011.

- We believe that the pricing for the latest acquisition is fair given its mid-to-long-term earnings potential. Firstly, the existing parcel measures ~462 acres, and is adjacent to the new parcel that WCT is eyeing.

- Combined, WCT would have access to ~ 682 acres of sizeable development land in Serendah that can be carved into commercial or residential developments.

- Furthermore, our channel checks indicate that future accessibility to the said land will improve with the opening of the Sg.Buaya interchange along the North- South Expressway back in January.

- It was reported earlier that this new 1.5km interchange costs about RM87mil, and forms part of the government’s larger plans to develop the Hulu Selangor region.

- WCT will fund the land purchase through internally-generated funds. We do not expect any funding issues, given the group’s relatively decent net gearing position of 31%-39% over the next two years.

- Not unlike its peers, WCT appears to be beefing up its landbank during the current property lull. New property sales secured was RM245mil for 1H14 (our FY14F target: RM772mil), but it should pick up in 2H14 with new launches and the expected conversion of bookings from the Paradigm service apartments in Kelana Jaya.

- That said, WCT’s other key challenge in the near term is the ramping up of its orderbook prospects, which has disappointed in recent months. Similarly, all eyes will be on the performance of Gateway@KLIA2 in the months ahead; the previous guidance for this new mall is to churn out a net profit of RM5mil for RM10mil.

- We leave our earnings forecast unchanged for now pending further updates from this new landbank.

Source: AmeSecurities