WCT to list REIT in mid-2018, may inject Paradigm Mall JB — Affin Hwang IB

KUALA LUMPUR (Oct 27): WCT Holdings Bhd is expected to list its real estate investment trust (REIT) in mid-2018, after it had had delayed the listing of the property trust that was scheduled by end-2017, according to Affin Hwang Investment Bank Bhd (Affin Hwang IB).

In addition, Affin Hwang IB said WCT may consider injecting its fourth and latest mall — Paradigm Mall Johor Bahru — into the REIT "if the mall does well after opening", which is slated to be on Nov 28.

"This could potentially double the total asset size of the REIT to RM2 billion," Affin Hwang IB analyst Loong Chee Wei said in a note to clients today, which was issued after the investment bank hosted WCT for a 1.5-day roadshow in Singapore recently.

Currently, Affin Hwang IB said WCT has secured tenants that are covering 83% of the total net lettable area, which according to its website, spanned a sprawling 1.3 million sq ft.

Built over 13 acres of freehold land, the latest Paradigm Mall Johor Bahru features 20,000 sq ft of indoor ice-skating rink and 35,000 sq ft of gourmet supermarket, together with over 4,200 of parking bays.

Besides Paradigm Johor Bahru, WCT also operates three other shopping malls: gateway @ klia2 in Sepang, Paradigm Mall Petaling Jaya, and Bukit Tinggi Shopping Centre in  .

Separately, Affin Hwang IB said most of the investors present at the roadshow were surprised by WCT's proposal for a private placement exercise, the second time it had done so this year.

"We understand the private placement was proposed on concern that most of the outstanding WCT-WD warrants are not converted when it expires on Dec 11, 2017," Affin Hwang IB noted.

To recap, WCT had on Oct 16 announced its plan to raise cash proceeds of RM240 million via a private placement exercise to issue up to 10% of new shares to selected investors.

WCT's proposed private placement is the second issuance this year and less than seven months from end-March after it undertook the same corporate exercise and raised RM178 million.

"The timing of issuance could be 2% of share capital by end-2017 and another 8% of share capital from April 2018 onwards at the earliest due to the limit of private placement issuance equivalent to 10% of share capital within a year," Affin Hwang IB said.

"If the remaining WCT-WD warrants are exercised at RM1.71 per share, raising about RM200 million, this could alleviate the need to issue shares under the private placement," Affin Hwang IB added.

Up to end-August, Affin Hwang IB said WCT had secured RM1.77 billion worth of new contracts, pushing up its current construction orderbook to RM5.9 billion.

"It (WCT) has submitted tenders worth more than RM6.1 billion currently. The company is on track to meet its RM2 billion new contract target in 2017," Affin Hwang IB said.

"The tender outcome should be known soon for several building projects and an elevated highway project that WCT submitted bids for," Affin Hwang IB added, noting that some potential new projects could include RM1 billion for Lend Lease's mall in Tun Razak Exchange, RM1 billion for Pavilion Bukit Jalil Mall, RM250 million to RM300 million for an elevated highway to link Pusat Bandar Damansara to Jalan Duta, and RM1 billion to RM1.5 billion for East Coast Rail Link infrastructure.

At 12:10pm, WCT shares were trading six sen or 3.95% higher at RM1.58 today, valuing the company, which is controlled by tycoon Tan Sri Desmond Lim, at a market capitalisation of RM2.24 billion.

Shares in WCT have fallen by 31.6% from RM2.31 on May 18.

"We believe the correction in the share price provides an opportunity to accumulate the stock in light of improving long-term prospects," Affin Hwang IB said, assigning a 12-month target price of the stock at RM2.46 per share. — theedgemarkets.com

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