Yesterday, WCT proposed a few corporate exercises, which include: i) a bonus issue at a ratio of 3-for-20 shares at an entitlement date to be determined later; ii) an issuance of free warrants, named Warrant D, on the basis of one warrant for every five shares held; and iii) a proposal to increase its authorised share capital from RM800m to RM1.1bn.

Bonus  to  fuel  sentiment.  We  deem  the  bonus  issue  a  positive  surprise  and  a  move which may boost trading sentiment on WCT's shares over the immediate term. Based on the share's last  closing  of  RM2.54,  with  a  total  share  capital  of  822.9m  shares,  we estimate that its share price would be adjusted to RM2.21 post the 3-for-20 bonus issue. Accordingly, our FV is adjusted from RM3.36 to RM2.92 ex-bonus, at an adjusted share capital of 946.3m.

Warrants to beef up capital base. At the same time, the company is proposing for the issuance of free warrants named Warrant D at a  1-for-5 ratio as well as to increase its authorised  share  capital  from  RM800m  to  RM1.1bn.  Should  the  warrants  be  fully exercised  at  a  hypothetical  ex-bonus  exercise  price  of  RM2.21,  this  could  potentially raise  RM418.1m.  The  move,  in  our  view,  is  intended  to  open  the  possibility  of  further beefing  up  of  its  capital  base  as  the  group  continues  to  scout  for  strategic  landbank acquisitions.  Following  its  recently-proposed  issuance  of  up  to  RM1bn  medium  term notes to fund land acquisitions of RM450m in OUG as well as RM180m in Jalan Skudai, Johor  Bahru,  we  believe  the  potential  conversion  of  warrants  would  also  help  to  meet the debt covenants.

BUY.  We  view  the  announcement  as  a  positive  surprise  and  we  continue  to  like  the company given its solid orderbook of approximately RM3.7bn with more contracts likely to be awarded before the year turns. There are potential growth catalysts from the KLIA2 Integrated  Complex,  which  is  scheduled  to  commence  operations  by  March  next  year, as well as WCT's  fast-expanding  property  management  portfolio  to  provide  a  recurring earnings base. Hence, maintain BUY with our FV unchanged at RM3.36 or RM2.92 ex-bonus issue.

Source: OSK