WCT is disposing of 602.5 acres of land in Ulu Selangor for RM214.2m which is expected to net a post-tax gain of RM45.5m. We view this transaction positively as WCT has no immediate plans for this land and its net gearing will ease further to 0.91x (from 1.10x as of 1QFY21). BUY with a TP of RM0.64 pegged to 0.3x PBV. At current PBV valuation of 0.23x, we find WCT’s valuations appealing in view of potential earnings rebound post pandemic

WCT has entered into an SPA with MDCon (Simpang Empat) S/B to dispose of 12 pieces of freehold land (602.5 acres) located at Serendah, Ulu Selangor for RM214.3m (or RM8.17/sf). This disposal is expected to net WCT a post-tax gain of RM45.5m and will take up to 9 months to complete (i.e. by May 2022).

We view this disposal positively as WCT has no immediate plans for this large plot of land and the sale will further reduce their net gearing from 1.10x in 1QFY21 to 0.91x.

Moving forward, we foresee the quantum of its future land sales to decline given that WCT only has a handful of non-core lands remaining in their books. These include lands located in: (i) Klang (79 acres), (ii) Medini, Johor (39 acres), and (iii) Inanam, Kota Kinabalu (22 acres). By our estimates, these lands could fetch a cumulative value of c.RM550m-RM700m.

Post the land sale, we increase WCT FY22E earnings by 54% to factor in the RM45.5m gain. Land sales are treated as core earnings given that WCT has been consistently selling lands for the past four years.

Source: Rakuten Research - 17 Aug 2021