THE BUZZ  

WCT  has  proposed  to  set  up  a  new  holding  company,  called  WCT  Holdings  (WCTH), which  will  assume  the  former's listing  status  on  Bursa  Malaysia.  The  group  will  also transfer its 100% stake in WCT Land, its property development and investment arm, to WCTH.

OUR TAKE  

Details  on  the  proposal.  Under  the  corporate  proposal,  all  existing  WCT  share-  and warrant-holders will exchange their respective holdings in WCT on the basis of one-for-one for a corresponding  equivalent stake in WCTH. Subsequently, WCT will become a 100%-owned subsidiary of WCTH,  with the latter assuming WCT's listing status on the Bursa  Malaysia  Main  Market.  Meanwhile, WCT's existing property development and investment  arm,  WCT  Land,  will  be  transferred  over  as  a  direct  subsidiary  of  WCTH, while its present construction business would remain under the WCT umbrella.
 
Neutral  on  the  move. We are  neutral  on  the  proposed  restructuring given  that  WCT's core businesses remain largely intact  while the exercise, on completion, would have no impact on the group's consolidated financials. On paper, the  proposal  carves  out  its existing property business and creates a new holding company overlooking both WCT's property and construction divisions.   
 
Potential  listing  of  property  business?  While  management  highlighted  that  the proposed restructuring is intended at segregating as well as streamlining its operations, we believe this could be a prelude to a potential separate listing of its property business under WCT Land in view of its aggressive landbank expansion. In an earlier move, the group  had  proposed  to  acquire  two  separate  pieces  of  land  this  year  at  a  total acquisition  cost  of  RM630m.  Its  outstanding  landbank  currently  stands  at  about  1,040 acres. In the meantime, its property investment division continues to flourish with  three properties  currently  under  its  management.  These  are  Bandar  Bukit  Tinggi  Shopping Mall and Premiere Hotel both in Klang as well as the Paradigm Mall in Kelana Jaya. By 2QCY13,  the  group's  70%-owned  KLIA2  Integrated  Complex  should  commence operation. We estimate that WCT's property division as a whole chalks up profit of some RM120m-RM140m p.a. at EBIT level. Although it is still preliminary at this juncture, we see the potential floating  of this division as a positive move to help unlock the value of the group's fast-growing property business as well as to shore up its balance sheet for future expansion.  

BUY.  We  are  largely  neutral  on  the  proposed  corporate  restructuring  at  this  juncture, with  potential  catalysts  being  the  possible  separate  listing  of  WCT's  property development  and  investment  business.  Hence,  we  are  maintaining  our  BUY recommendation, with our FV unchanged at RM3.36, or RM2.92 ex-bonus issue.

Source: OSK