PETALING JAYA: WCT Holdings Bhd’s deleveraging exercise is seen on track, with the Sungai Buaya land sale negotiation expected to be finalised soon.
The transaction could potentially raise up to RM200mil for the construction and property development company.
If the deal goes through, it will improve WCT’s net gearing to 0.52 times from the present 0.65 times, according to UOB Kay Hian (UOBKH).
It said the estimation takes into account the first tranche of RM319.2mil that WCT received from Meydan Group LLC for the Nad Al Sheba Dubai Racecourse contract dispute settlement.
The brokerage noted that WCT has managed to raise RM135mil year to date from land sales recognised in the first quarter of this year.
“The surprise Nad Al Sheba Dubai Racecourse contract dispute settlement will see WCT pocketing a net proceed of RM575mil.
“Coupled with the asset monetisation exercise, WCT’s balance sheet would vastly improve, moving forward,” UOBKH said in a note.
It said it did not expect WCT to pay out any special dividend from the proceeds of the Nad Al Sheba Dubai Racecourse contract dispute settlement, given the Covid-19 situation.
“WCT will most likely utilise the proceeds to pare down its debt (estimated at RM200mil) and preserve the remainder for future working capital needs,” UOBKH said.
“WCT also expects to report a gain of RM173mil from the settlement which, based on our estimate, will be recognised starting the third quarter of 2023, after it covers all the costs,” it added.
Separately, UOBKH said WCT’s property sales target of RM1bil for 2021 is still achievable, assuming the property sector could resume operation in August.
It noted that all of WCT’s Klang Valley construction projects, which constituted about 75% (RM3.9bil) of the group’s outstanding orderbook, had been put on hold during the enhanced movement control order, which started on July 3.
Still, UOBKH maintained a “buy” on WCT, with a target price of 93 sen, representing 61.7% potential upside from its closing price of 57.5 sen on Monday.