WCT (BUY)

Meydan Arbitration Progress

• WCT-Arabtec JV (50:50 stake) has updated the arbitration status for the Nad Al-Sheba Racecourse Project by Meydan LLC.
• We believe that WCT-Arabtec JV will press ahead with arbitration proceedings against Meydan. On the other hand, Meydan has retaliated by filing a civil suit for AED3.5bn (~RM3bn) against the JV, which we believe is a tactic to get them to settle outside the courtroom. Overall, we are neutral on this event as it will be a long drawn affair.
• In WCT's books, the company has RM265m in claims against Meydan and payables of RM265m to the nominated subcontractor which has a back-to-back arrangement. Hence, any writedown should not occur.
• No changes made to our forecast. Maintain BUY with unchanged TP of RM3.36 based on 14x average FY12 and FY13 earnings.

Source: Hong Leong Investment Bank Research - 28 June 2012