INVESTMENT HIGHLIGHTS

• WCT to jointly develop a residential project with CCCG

• The development is scheduled to complete by end-2022

• Project GDV is estimated to be RM1.1b

• Earnings forecast unchanged due to minimal near term impact

• Maintain BUY with an unchanged TP of RM1.05

The news. According to a news update, we understand that WCT together with a Chinese partner, China Communications and Construction Group (CCCG), will jointly develop the first residential project at the Tun Razak Exchange (TRX). Upon completion, the project will carry an estimated gross development value (GDV) of RM1.1b.

A JV company, CORE Precious will spearhead the project on the basis 80:20 in equity between CCCG and WCT. As the project owner, its plan is to develop two serviced apartment towers, with completion scheduled around the end of 2022. At this juncture, we noted that CORE Precious is in the midst of tendering the project to main contractor.

Project’s background. The plan to develop high-end service apartments came following WCT Precious Development’s (WCTPD, a wholly owned subsidiary of WCT Land) acquisition of TRX land which measures 1.65 acres. The company entered into an SPA with KLIFD Sdn Bhd (a unit of 1MDB) for a purchase of land worth RM223m or RM3,100psf back in Oct 2015. In reference to our channel check, the purchase price was lower in comparison with previous deals, with price tag averaged at RM4,595psf in CY18.

Collaboration with Chinese partner. Following the purchase of 80% stake in WCTPD by Chinese partners (namely CORE SPV and CCCC), the land in entirety was valued at RM250m. The majority stake by CCCC will allow the entity to drive the development, as well as financing and marketing of the project. On the other hand, the divestment exercise by WCT will enable the group to reduce the capital commitments on land banking and property development.

Source: MIDF Research - 10 Jan 2019