MIDF Research said the REIT would likely include all five malls of WCT and its three hotels.
PETALING JAYA: WCT Holdings Bhd
’s proposal to set up a real estate investment trust (REIT) is a “good opportunity” to unlock the value of its malls and hotels.
It will also lighten the balance sheet of the highly-geared WCT, said MIDF Research.
The research house stated that the REIT would likely include all five malls of WCT and its three hotels.
Of the five malls, WCT wholly owns AEON Mall Bukit Tinggi and Paradigm Mall Johor Baru and controls a 70% stake in both Paradigm Mall Petaling Jaya and gateway@klia2.
It also owns 60% of Subang Skypark.
All five malls are close to full occupancy.
Meanwhile, the three hotels are Le Meridien Petaling Jaya, Premiere Hotel Klang and Hyatt Place Johor Baru.
WCT is still in the midst of identifying the properties to be included in the REIT.
Once identified, the properties would be disposed of by the subsidiaries and joint ventures to the REIT to be paid in cash and new REIT units.
“Apart from allowing WCT to unlock the value of its malls, the group will also be able to raise funds to pare down its borrowings.
“With total borrowings of RM3.15bil as at March 31, 2024, the group is highly geared at 74.5% net.
“This will place WCT in better financial standing in anticipation of upcoming mega-projects in the country.”
MIDF Research also expects WCT’s order book to improve, moving forward.
It is noteworthy that after a two-year hiatus, WCT finally secured a much-needed external job in June this year, a RM249.7mil package for the construction of additional lanes for the North-South Expressway on the stretch from Yong Peng to Senai in Johor.
The project is expected to be completed in three years by June 2027.
Its outstanding order book now stands at RM3.2bil.
WCT has an active tender book of RM20bil.
“Assuming a conservative hit rate of 10%, we are of the opinion that WCT may be able to secure RM2bil of new jobs for the financial year 2024 (FY24).
“We believe this may come from the Penang International Airport expansion, Pan Borneo Sabah, other packages for the North-South Expressway expansion and potentially its first data centre project.
“The RM1.3bil Subang Airport Regeneration Plan would provide WCT with an immediate boost to its order book, though more clarity is needed on the implementation of the project.”
The research house lifted its earnings estimates slightly by 13.3% to 16.7% to factor in stronger job wins, on the back of a stronger rollout of government projects that are expected in the second half of 2024.
Following the earnings revision, MIDF Research raised the target price of the counter significantly to 97 sen from 50 sen.
MIDF Research has maintained its “neutral” call on WCT.
While prospects remain bright for the construction sector and for WCT to replenish more jobs, the recent rise in its share price by close to 80% since June 2024 has stretched its valuations for a fair bit.
“We believe this indicates that all the positives have been priced in.”
Earlier this week, the company said that it has proposed to establish a REIT and list it on the Main Market of Bursa Malaysia.
It had said the proceeds to be raised from the REIT listing will be used to pare down borrowings and capitalise on strategic business opportunities.
