- Yesterday, WCT announced on Bursa Malaysia that its wholly owned unit Jubilant Courtyard Sdn Bhd (JCSB) has signed a conditional subscription and shareholders agreement (SSA) with UEM Sunrise (UEMS)

- Under the agreement, UEMS will take up a 50% stake in JCSB for a consideration of RM215mil.

- With this, WCT's effective stake in JCSB will also be halved to 50%.

- JCSB is the beneficial owner of some 608 acres of land in Serendah, Hulu Selangor.

- Based on the divestment of a 50% stake for RM215mil, the implied land cost is approximately RM16psf.

- Roughly 10% or RM25mil of the purchase consideration will be paid upon the signing of the SSA. The balance 90% or RM193mil will be paid within three months from the unconditional date of the SSA.

- The entire deal is to be consummated by 2Q 2016.

- We understand that JCSB has been earmarked as the vehicle to spearhead the development of an integrated, mixed used project with an indicative GDV of RM3bil. It is located approximately 30 minutes from the KL city centre.

- However, contributions will not be immediate - the project is only slated to kick off by end 4Q 2017. The development covers ten years over ten phases.

- We believe WCT's latest move to pare down its stake in the Serendah land will help improve its FY16F net gearing ratio to 74% from 81% currently. Despite a lower effective 50% stake in the land, we also estimate WST’s FV to marginally increase to RM1.59/share (current: RM1.58/share) owing to a higher indicative GDV of RM3bil (our current assumption: RM1.2bil).

- As for UEMS, this project is reflective of the groups' ongoing move to diversity beyond its landbank in Nusajaya. This translates into a marginal increase in its fair value to RM1.17 (currently: RM1.16/share), although FY16F net gearing will rise (from 14% to 17%).

- We maintain our earnings forecast for both stocks pending the finalisation of this exercise. As such, we maintain our HOLD ratings on WCT (FV: RM1.58/share) and UEMS (FV: RM1.16/share).

Source: AmeSecurities Research - 2 Dec 2015