WCT shares down after fundraising announcement

PETALING JAYA: Shares in construction outfit WCT Holdings Bhd tumbled to its 12-month low following a fundraising announcement of RM242mil through issuance of new shares.

This would be the company’s second fundraising exercise for this year to reduce its debts. In April, it raised close to RM180mil.

On Tuesday, WCT shares closed eight sen lower to RM1.60, the lowest since Oct 12 last year.

Analysts were mostly neutral on the second round of private placement, with MIDF Research reiterating its “sell” call on the counter with a target price of RM1.47 apiece.

The research house said the placement exercise was “necessary for WCT” due to the size of its order book, which stood at about RM6bil.

“It is critical for WCT to improve its debt level and working capital to reduce construction delays and avoid cost overruns,” MIDF said on Tuesday.

As at June 30, WCT’s total debt was RM3.2bil and gross gearing at 1.06 times.

MIDF said the placement exercise would reduce WCT’s debt-to-equity from 1.06 times to 1.048 times.

Under the latest proposed placement, WCT is planning to sell 140 million new shares, representing 10% of its share capital. It is planning to raise RM242mil at indicative price of RM1.73 a share.

From the proceeds, WCT has earmarked RM100mil to reduce its bor- rowings, with the remaining RM140mil for ongoing construction projects such as the two major rail projects, namely the LRT3 and MRT2, as well as the Pan Borneo Highway project in Sarawak.

Kenanga Research said the second placement exercise was not much of a surprise especially with the company’s ongoing de-gearing strategy.

“We believe that management would only proceed with the new placement in the event that its Warrants-D are not fully converted by year-end,” it said.

It pointed out that the conversion of the warrants could raise RM210mil if fully converted.

Kenanga said WCT’s order book would provide earnings visibility for the company in the next two to three years.

On its property division, the company has unbilled sales of RM487mil with 1½ years visibility.

“The management intends to continue with its re-pricing strategy to clear its existing inventories amounting to gross development value of RM644mil,” Kenanga said.

Apart from new shares issuance, it has been reported that WCT has set aside RM800mil worth of assets to be disposed of.

The company is also eyeing the listing of its real estate investment trust (REIT), which has postponed for several times.

For the REIT listing, WCT is targeting to inject RM1.1bil worth of assets, comprising Paradigm Mall in Petaling Jaya as well as Aeon Mall and Premiere Hotel in Klang.