Uncertainty over second share placement’s benefit to WCT shareholders
KUCHING: Analysts remain on the fence over WCT Bhd’s ( WCT) latest proposal of a private placement of up to 140 million new shares, translating to about 10 per cent of its existing paidup share capital at an indicative issue price of RM1.73 per share.
WCT expects to raise RM240.2 million net proceeds from the exercise, of which RM100mil is earmarked for debt repayment while the balance RM140.2mil for working capital purposes.
This is the second private placement WCT has undertaken this year. Recall that WCT in January 2017 proposed a private placement of up to 125 million new shares.
In April this year, it managed to place out 100.5 million new shares at an issue price of RM1.77 per share, raising gross proceeds of RM178 million. However, it failed to place out the remaining 24.5 million new shares before the approval lapsed.
“We believe that WCT is not offering much comfort to investors by coming to the market for funds, twice, in less than a year,” said AmInvestment Bank Bhd (AmInvestment Bank) in a report yesterday on the group.
“Based on our estimates, the proceeds will reduce WCT’s net debt and gearing of RM2.6 billion and 0.86 times as at end of the first half of 2017, to RM2.4 billion and 0.72 times respectively.”
On the other hand, the team with MIDF Amanah Investment Bank Bhd ( MIDF Research) said the share placement will help improve financial headroom for WCT.
“Should WCT achieves to raise the notional amount of RM242.2 million based on RM1.73 per share, 41.2 per cent or RM100 million would be deployed to reduce borrowings for on-going construction projects including the Pan Borneo Highway.
“Apart from that, the outstanding RM100.2 million or 41.4 per cent would be used to improve working capital. The remaining RM2 million would be used to offset expenses related to the proposed shares placement. We believe that the share placement exercises are necessary for WCT to maintain ample financial headroom.”
The share placements would also minimise the overhang for WCT’s direction and risks profile from its sizeable orderbook, it added.
WCT’s orderbook recently swellede to circa RM5.9 billion due to the award of LRT3’s Package GS02 ( Merchant Square- Suria Damansara, 2.9km). To recap, WCT’s working capital has decreased from RM1.18 billion in 1HFY16 to RM879 million in 1HFY17 comparatively.
Hence, MIDF Research said it was critical for WCT to improve debt level and working capital in order to reduce construction delays and avoids cost overruns.
AmInvestment Bank maintained its view that WCT will ultimately be turned into the flagship private limited compant of Tan Sri Desmond Lim, via the injection of Malton (a sister company of WCT, with its prized asset being Pavilion Bukit Jalil) and Lim’s private business ventures including Pavilion Kuala Lumpur and Pavilion Damansara Heights.