OUTPERFORM
Target Price: RM3.93


News
WCT announced that its 100%-owned subsidiary, WCT Hartanah Jaya Sdn Bhd had acquired a piece of land measuring 12.4 acres together with an abandoned shopping mall in Mukim Tebrau, Johor, from MBSB for a price consideration of RM180m.

Comments

• The abandoned shopping mall comprises of a 4-level retail podium and 2 levels of car parks above the podium. The mall is located along Jalan Skudai, 3km away from Tampoi, 8km radius within the PLUS North-South highway and about a 15km radius to Medini Iskandar.  
• The land is earmarked for commercial development comprising of a shopping mall, one block of hotel (432 rooms), one tower of service apartment (216 units) and 6 levels of car parks with an estimated GDV of RM900m for the next 3 to 4 years.  
• Based on our checks, the market price for the land surrounding the area is valued at RM180psf, which already makes up about 54% of the acquisition price. We opine that the price is fair considering its strategic location for commercial and residential developments.  
• Assuming the development cost at 60% of the GDV, we expect WCT to fork out about RM540m (including RM83m worth of the existing building) to develop the land. With a 80:20 debt to equity ratio, we envisage that WCT will be able to finance the equity portion of RM108m for the next 3 to 4 years. As at June 2012, WCT's cash balance stood at RM893m.

Outlook
Its construction division will remain as the main contribution to its earnings and we expect WCT to secure more construction contracts in the near term i.e. Petronas RAPID and TRX earthworks with a combined value of more than RM2.0b.

Forecasts
No changes in our FY12-13E estimates.

Rating 
Maintain OUTPERFORM

We are maintaining our OUTPERFORM recommendation for WCT, which offers an attractive upside (+47%) from the current price.


Valuation

No change in our Target Price of RM3.93 which is based on SOP valuation.


Risks

Delays in its ongoing projects and award of ETP based projects.



Source: Kenanga