We  maintain  our  SELL  call,  forecasts  and  TP  of  MYR1.40  (14% downside)  following  WCT’s  proposed  1-for-10  rights  issue  of  new shares  (which  will  raise  MYR141.2m)  and  1-for-5  bonus  issue  of  new warrants.  WCT  has  yet  to  secure  any  work  packages  from  the  Klang Valley mass rapid transit (MRT) project.  Also, its property business is facing headwinds amid various cooling measures.

To  raise  MYR141.2m  fresh  capital.  WCT  has  proposed  a  1-for-10 rights issue of up to 143.2 new shares  at an indicative rights price of MYR1.00, and after the completion of the rights issue, a 1-for-5 bonus warrant issue of up to 315.1m new 5-year warrants (Warrants E) with an indicative exercise price of MYR1.71. The rights issue of new shares will raise  MYR141.2m net proceeds (after expenses), which are “earmarked for working capital to finance the day-to-day operations of WCT”.  Based on our calculation, the rights shares and  bonus  warrants will dilute our current fully-diluted FY15 EPS of 11.7  sen by another 13% to 10.2  sen. The MYR141.2m net proceeds from the rights issue of new shares will reduce WCT’s net debt and gearing of MYR1.48bn and 0.66x as at 30 Dec  2014  to  MYR1.34bn  and  0.56x  respectively.  We  are  slightly negative on the proposed exercise due  to  the dilutive impact  on EPS  as mentioned.

Forecasts.  Maintained pending the completion of the exercise.

Risks to our view: i) job wins in FY15-17F falling short of our MYR1.5bn per  annum  assumption;  ii)  higher-than-expected  input  costs;  and iii) weak demand for its property launches.

Maintain  SELL.  The  prospects  for  the  construction  sector  are  strong, underpinned by the MYR73bn Klang Valley MRT project, which should keep  industry  players  busy  until  2021.  However,  WCT  is  not  an  ideal proxy  as  it  has  yet  to  secure  any  Klang  Valley  MRT  job.  Its  property business is facing headwinds amid various sector cooling measures. We keep  our  TP  at  MYR1.40  based  on  12x  fully-diluted  FY15F  EPS  of 11.7sen, in line with our benchmark sector 1-year forward target P/Es of 10-16x. At the current price, the stock is trading at 14x FY15F P/E (fullydiluted),  which we deem rich in the absence of any significant near-term re-rating catalyst.  No helping either is the just-announced cash call  that may not go down well with some investors.