What’s New

WCT has proposed a private placement of up to 125m new shares representing 10% of its issued and paid-up share capital. Based on illustrative price of RM1.70/share, proceeds raised could amount to RM213m, where RM80m will be for paring down bank borrowings, RM130m for working capital purposes and balance RM3m for listing expenses. The working capital proceeds will be used for a combination of construction and property projects. For the construction segment, it will be for MRT Line 2, Pan Borneo Sarawak and RAPID project while for the property segment it will be for Paradigm Mall, Johor Bahru and two other projects in Klang Valley.

The placement exercise is not a surprise as WCT remains committed to reducing gearing levels while its working capital needs are also high. As at 30 September 2016, WCT’s net gearing was 1.1x and the placement will trim this to 0.98x. This has yet to take into account proceeds from the sale of Ascent Paradigm for RM347m which will be used to pay MTN holders (RM200m) and the balance used for completing the projects in the vicinity of Paradigm. Other potential initiatives will be the injection of two malls into Pavilion REIT, asset sales including part of the TRX land and the residential tower at Paradigm Mall. If all initiatives come to fruition, its net gearing could fall to 0.5x.

The completion of the placement is slated for 3Q17, depending on the date of approval from Bursa Malaysia. Based on our estimates, the placement will have a 6% dilution to FY18F EPS, assuming interest savings from the part payment of the RM80m bank borrowings.

Source: Alliance Research - 19 Jan 2017