HLIB Research maintains ‘hold’ call on WCT
KUALA LUMPUR: WCT Holdings Bhd’s settlement with Meydan Group LLC could ease the former’s balance sheet pressure in the near term, said Hong Leong Investment Bank Bhd (HLIB Research).
The settlement relates to Meydan’s decision to cancel the 4.6 billion dirham Nad Al Sheba race course project in Dubai that was awarded to WCT in September 2007.
WCT said in a Bursa Malaysia filing Meydan would pay 726.57 million dirham to settle the issue.
HLIB Research analyst Edwin Woo said WCT could receive about RM577 million post-subcon repayment, adding that the company had given a 35 per cent haircut to Meydan.
“By our estimates, WCT will recognise a gain of RM200 million progressively over three years and its net gearing could fall to 85 per cent from 110 per cent.
“WCT will preserve capital to meet sukuk redemptions due over the next few years,” he said in a research note yesterday.
HLIB Research has maintained a “hold” call on WCT with an unchanged target price of 56 sen.
MIDF Research viewed the settlement as a positive surprise development for WCT in building up its coffers.
Its analyst, Khoo Zhen Ye, said the settlement of RM828.2 million would enable the group to have a stronger financial position.
“It also increases the likelihood of successful biddings for further mega infrastructure projects, in which the private financing initiative model has been explored by the government,” she said in a research note.
Khoo said its net gearing ratio could be improved significantly to 0.44 time from 0.66 time as of March 31.