Jubilant Court, a wholly-owned subsidiary of WCT Land which in turn is a wholly-owned subsidiary of WCT Holdings (WCTHG), had entered into a  conditional  sale  and  purchase  agreement  with  Matad  for  the acquisition  of  four  pieces  of  vacant  freehold  located  in  Bandar Serendah,  Daerah  Ulu  Selangor  at  a  total  purchase  consideration  of RM115.4m. The four pieces of land, measuring a total of 893,268 sq m or  9,615,057  sq  ft,  are  located  adjacent  to  WCTHG’s  461.7  acre  land bank  in  Serendah.  Subject  to  conditions,  the  proposed  acquisition  is expected to be completed in three months. There are no liabilities to be assumed  and  the  purchase  consideration  will  be  funded  by  internal generated  funds.  WCTHG  intends  to  undertake  a  mix-commercial development project on the lands. (Source: Bursa Malaysia)

Comment:  We  believe  that  the  proposed  acquisition  will  be  long  term positive  for  WCTHG  given  the  scarcity  of  large  pieces  of  land  for development  in  the  Klang  Valley  and  proximity  to  the  group’s  existing land bank in the area. The implied land cost of approximately RM12 psf looks  reasonable  compared  to  the  RM19.65  psf  paid  by  Gamuda  for 724.3  acres located  south  of  Rawang and  nearer  to  the  city.

WCTHG paid approximately  RM1.88 psf for the 461.7 acre acquired in 2011 but since  then  the  valuation  of  land  and  properties  in  the  Rawang  vicinity has appreciated considerably. Internal funding is available as the group has a cash reserve of around RM430m, which will rise when the group commence development of the its existing land banks in Serendah and OUG. In September, the group had also received approval to establish a RM1.5bn Sukuk Murabahah Programme. There will be no contribution from the acquisition until development plans are finalized and projects launched.

We maintain our BUY rating for WCTHG with a target price of RM2.65.

Source: Affin Hwang Capital Research - 21 Oct 2014