News

• Acquires company for Mont Kiara land. WCT has acquired a 100% stake in Kekal Kirana SB (KKSB) for an insignificant sum of RM1k. In Nov 2016, the latter entered into a Sale & Purchase Agreement (SPA) for the acquisition of a piece of freehold land in Mont Kiara at a price tag of RM80m. The SPA is expected to be concluded in May 2017.
• Established area. The said 3.14 acre land is sited on the western side of Changkat Duta Kiara in Mont Kiara. Key landmarks include Istana Negara and other established developments such as Seni, 1MK, Mont Kiara Pines, Mont Kiara Bayu and Pavilion Hilltop.
• DO obtained. KKSB has obtained a development order from DBKL (city council) for the proposed development of 336 units of service apartments, clubhouse and 4 villas. There are plans to make certain reversions to the development into 3 blocks of service apartments comprising 408 residential units with an estimated GDV of RM600m.

South Comments

• Foray into Mont Kiara. The acquisition of KKSB would enable WCT to gain a foothold into the Mont Kiara property market. In the past, WCT’s property developments have been centred within the Klang area (i.e. Bdr Bukit Tinggi, Bdr Parklands and Laman Greenville). We also view this move as part of the new management’s effort to offer a more upmarket product to home buyers.
• Pricing is reasonable. The land acquisition price translates to RM585 on a psf basis which our property analyst feels is reasonable. However, in relation to GDV, the land cost only amounts to 13% which is lower than the usual range of 20- 25% for new acquisitions.
• Minimal impact to gearing. We estimate that the land acquisition would marginally increase WCT’s net gearing from 91% (end FY16) to 94% on a proforma basis.

Risks

• Risk to this proposed development is the condo oversupply situation in Mont Kiara.

Forecasts

• Unchanged pending more clarity on the development’s launch schedule. ???

???? Rating

Maintain HOLD, TP: RM1.97

• We reckon that any rerating potential is likely to be muted unless earnings delivery becomes more consistent and its de-gearing plans bear fruit.

Valuation

• Our SOP based TP of RM1.97 implies FY17-18 P/E of 17x and 14.6x respectively which has taken into account the recent 10% share placement.

Source: Hong Leong Investment Bank Research - 28 Apr 2017