A more efficient structure for WCT

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PETALING JAYA: The restructuring of WCT Bhd will create two entities with separate balance sheets, which will result in a more efficient group structure and better reflect its businesses.

The restructuring exercise is being undertaken to unlock the value of WCT’s property development business that is currently overshadowed by the construction arm.

According to Kenny Wong, WCT and WCT Land Bhd corporate affairs director, the group has submitted the application for the restructuring to the authorities and expects it to be completed by the second quarter.

Under the proposed restructuring, the listing status will be transferred to WCT Holdings Bhd that will own WCT, the engineering arm, and WCT Land, the property development arm.

“The transfer of listing will most likely be made in the second quarter of this year,” Wong told The Edge Financial Daily in an email reply to questions last week.

At the moment, analysts say the value of the property development arm is not reflected in WCT, although the construction and engineering company has been aggressively expanding its landbank to diversify earnings.

According to Maybank IB research, earnings from the construction and property divisions contributed 50% each to the group for the first nine months of 2012.

The research report said management is targeting to increase the contribution from the property division to 55% by financial year 2016.

Projects such as the klia2 integrated complex (2013), Paradigm Mall in Johor Baru (2014), a mall in OUG, Kuala Lumpur, and Premiere Hotel in Johor Baru (2015) and another hotel in OUG (2016), are expected to boost the contribution of WCT’s property development and management business in the next few years.

The focus on building a reputable property development brand out of WCT Land followed by the restructuring process has prompted speculation that the group will eventually relist the property development arm. Wong said that option is still on the table but the board has not firmed up the matter.

“The board doesn’t have any plan at the moment, but I think the important thing is that we want to unlock the value of the property division through a restructuring,” he said.

The property development business started in the 1990s through the development of Bandar Bukit Tinggi in Klang, a RM4.7 billion in gross development value (GDV) township which comprises residential homes, shoplots, offices, and the largest Aeon Shopping Mall in Southeast Asia.

To date, the group has accumulated about 2,000 acres of land through WCT Land, mostly in the Klang Valley, with about 1,000 acres left to be developed WCT executive director Choe Kai Keong told The Edge Financial Daily recently that the group has land in Klang and Sungai Buaya in Rawang, Selangor.

“Roughly, we still have 350 acres in Bandar Bukit Tinggi. These will be developed as commercial properties. We have about 15 acres facing the Bukit Tinggi Jaya Jusco, which we are developing as a mixed commercial offices development worth about RM150 million,” he said.

Recently, WCT ventured into the rapidly growing property sector in Iskandar Malaysia, Johor, with the leasing of 18.12 acres of land in Medini North, Nusajaya. The land will be developed into a mixed development project with a GDV of RM1.5 billion.

WCT has also purchased 10.3 acres of land in Medini Business District to be developed into another mixed development project comprising 1.7 million sq ft of prime office space, neighbourhood retail and serviced apartments.

Besides developing townships, WCT has also ventured into the property management business. Its first shopping mall, built and operated by the group itself, was constructed in Kelana Jaya.

Paradigm Mall, located along Lebuhraya Damansara-Puchong, was completed last year, as the group pursued the diversification of its earnings stream to more sustainable recurring income through property management.

Besides Paradigm Mall, WCT has started a hotel chain under the brand name Premiere. The first Premiere Hotel was built in Bandar Bukit Tinggi, and a second hotel is being built within the Paradigm Mall development area.

“I think it is a natural evolution for a property developer, after you build a township you move into hotel, retail, offices. Traditionally we were in property development, now we are a mix of property development and investment.

“It also gives us recurring income, so that balances out the volatility of our income. Recurring income is always stable. No matter in good or bad times, our earnings will be quite stable,” said Choe.

For the period ended Sept 30, 2012, WCT recorded a net income of RM119.9 million, an increase of 4.7% over the previous corresponding period’s net income of RM114.5 million. Revenue during the period increased by 12% to RM1.18 billion from RM1.05 billion a year ago.

 

This article first appeared in The Edge Financial Daily, on Jan 29, 2013.

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