News

• Changes in major shareholders. Based on fillings to Bursa yesterday, WCT Capital has ceased to be a major shareholder in WCT following the sale of its entire 245.7m shares (19.7% stake). In a separate filling, Tan Sri Desmond Lim has acquired the exact same amount of shares, making him the largest shareholder in WCT with a 19.7% stake.

Comments

• Knowing the players. For the uninitiated, WCT Capital is owned by Mr Tiang Kim Hwa and Mr Wong Sewe Wing, being 2 out of the 3 founding members of WCT. On the other hand, Tan Sri Desmond Lim (TS Lim) is a renowned property mogul who owns a 35.3% and 28% stake in Malton (not-rated) and PREIT (BUY, TP: RM1.95) respectively. Via his private arm, he is also undertaking 2 Pavilion-branded developments in Damansara City and Bukit Jalil.

• Premium to share price. While no transacted price was disclosed for the said shares, our channel checks reveal that this was done at RM2.50/share, a 43% premium to the current share price.

• Transition plan in place. Following the changes in major shareholders, 4 existing directors of WCT are expected to resign in due course. This is to pave way for TS Lim and his aligned parties to assume board roles. Despite the change in major shareholders, we understand that most of WCT’s existing senior management (including the heads of construction and property) will remain intact.

• What can be brought to the table? As of now, it is still too early to pin down what exactly TS Lim will bring to WCT’s plate. Nonetheless, we reckon that the emergence of TS Lim in WCT could feed it with building related jobs from the former’s property companies. Also, given the common shareholding between WCT and PREIT, we cannot discount the possibility of the former’s malls eventually being injected into the latter. WCT owns the Paradigm Mall, AEON BBT Mall and Gateway@klia2. It is also developing 2 other Paradigm-branded malls in OUG and Johor.

Risks

• A significant change in WCT’s strategic direction (if any) as brought forth by its new major shareholder would be a potential risk to watch out for.

Forecasts

• Unchanged pending further revelation of the new major shareholder’s plans for WCT’s strategic direction.

Rating

Maintain BUY, TP: RM2.12

• Earnings rebound and sizable orderbook aside, the recent deal which was done at 43% premium to the current share price, could provide some upside excitement.

Valuation

• Our SOP based TP of RM2.12 implies FY16 P/E of 22x but this reduces to 16x in FY17 once earnings kick in. Valuation is also backed by RM1.6bn in net surplus value of its land (RM1.31/share).

Source: Hong Leong Investment Bank Research - 2 Nov 2016