Maybank IB Research PP16832/01/2013 (031128)

Transcription

1 Maybank IB Research PP16832/01/2013 (031128) Company Update 15 March 2012 WCT Buy (unchanged) Share price: Target price: RM2.61 Wong Chew Hann, CA (603) Stock Information RM3.15 (unchanged) Description: Construction group with interests in property development. Ticker: WCT MK Shares Issued (m): Market Cap (RM m): 2, mth Avg Daily Turnover (USD m): 1.51 KLCI: 1, Free float (%): 52.7 Major Shareholders: % WCT CAPITAL SDN BHD 18.8 EPF 16.0 KUMPULAN WANG PERSAR 5.3 LTH 5.2 Key Indicators Net cash / (debt) (RM m): (311.8) NTA/shr (RM): 1.77 Net Gearing (x): 0.2 Historical Chart Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Performance: 52-week High/Low RM3.19/RM1.85 WCT MK Equity 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) (3.7) 8.3 (13.6) (12.7) 9.7 Relative (%) (4.5) 1.0 (15.8) (18.9) 6.7 Sizeable land banking in Klang Valley Positive addition. WCT s proposed acquisition of a company holding a 57-acre land in Old Klang Road, KL will enhance its total land bank by 6%. However, as the land is located at the highly matured part of the Klang Valley, the development value is huge, projected at RM4b. This would lift the total outstanding GDV for its Malaysian projects by 70% to RM9.7b. We are positive on the development achieving good demand. Earnings contributions nonetheless are expected only from We retain our Buy call on WCT with an unchanged RM3.15 target price. RM450m for 57 acres. WCT has inked a share sale agreement to buy a 100% equity interest in Timor Barat Properties Sdn Bhd (TMP), an investment holding and property development company, for RM450m cash. TMP owns three parcels of freehold land totalling 57 acres at Taman Yarl, Old Klang Road in Kuala Lumpur. There is also an option to buy an adjourning fourth parcel but the details are not available. The total appraised value for the three parcels of land is RM450m or RM180 psf by Henry Butcher on 10 Mar We think this is a fair valuation. Good location. Taman Yarl is a well-established residential area (>40 years old, we estimate) located along Old Klang Road and is easily accessible via the Shah Alam Expressway. The fact that the land is freehold in status (instead of leasehold) will add to its attraction which would enable WCT to fetch good pricing for the products to be launched. WCT intends to undertake a mixed development project on the land. We are positive on strong buyers take-up if the development plans are well drawn up and executed. RM4b estimated GDV. This is based on a 60:40 residential-tocommercial ratio under a mixed development concept, which will include a suburban shopping mall. The development period is around 8 years, with the first launch expected in early Assuming a net margin of 20%, the total earnings potential is RM800m (99sen EPS). This new acquisition will lift WCT s total undeveloped landbank to 1,038 acres (+6%) and the total outstanding GDV for its Malaysian projects to RM9.74b (from RM5.74b), providing longer term earnings visibility. WCT Summary Earnings Table FYE Dec (RM m) Revenue 2009A 4, A 1, A 1, F 1, F 1,975.9 EBITDA Recurring Net Profit FD EPS (Sen) FD EPS growth (%) 43.6 (5.0) DPS (Sen) net PER EV/EBITDA (x) Div Yield (%) P/BV(x) Net Gearing (x) ROE (%) Book value (RM) Consensus Net Profit (RM m) n.a n.a n.a Source: MaybankIB SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

2 More about the land and company Details of the Taman Yarl land acquisition Land 1 Land 2 Land 3 Total Address (Jln Awan Cina, Tmn Yarl) L L 2778 L Land area (sq ft) 259, ,484 1,571,466 2,501,576 Tenure Freehold Freehold Freehold - 10 Mar 2012 (RM m) Equivalent psf (RM) Source: Bursa announcement Location of Taman Yarl land acquisition 15 March 2012 Page 2 of 5 Source: Google map Location and accessibility. We are familiar with the site as Taman Yarl is a well-established residential enclave located along Old Klang Road (6 th mile), alongside neighbours Taman Overseas Union, Taman Tan Yew Lai and Taman United. These are matured, self-contained townships aged at least 40 years old containing schools, retail, a suburban mall (Parkson is the main tenant) and offices. Taman Yarl is also very accessible we estimate 15km from the KL central business district via Old Klang Road and the Shah Alam Expressway. About Timor Barat Properties. The company is principally involved in investment holding and property development with a smallish net profit of RM317,011 in the 11M ended Feb 2012 and a net asset of RM9.2m. Its existing shareholders comprise three companies, Eng Lian Enterprise (71.9%), Shen & Sons (25.4%) and AMC (2.7%), while its directors are Ng Tian Ming, Ng Lu Siong, Ng Earn Chin, Yvonne Po Leng Lam, Ng Lu Pat, Ng Lam Shen and Khoo Su Min.

3 Easily funded. WCT s has a cash balance of RM804m as at end-dec 2011 which can easily fund the new acquisition. Net gearing stood at 0.39x as at end-2011 and we estimate that this will rise to 0.7x (proforma) post the acquisition of Timor Barat Properties. WCT s existing property development land bank Location Total Balance GDV Devt type acres acres (RMm) BBT, Klang 1, ,500 Township Klang # Luxury homes Paradigm, PJ Mixed commercial 1-Medini, Johor High-rise homes Medini Business District, Johor # Mixed commercial Bkt Jelutong, Shah Alam * Mixed commercial Bdr Serendah, S gor * Industrial Rawang, Selangor * ,200 Residential, comm Ho Chi Minh City, Vietnam ,500 Mixed commercial Total 1, ,240 # New in 2010; * New in 2011 Source: Company, Maybank IB INCOME STATEMENT (RM m) BALANCE SHEET (RM m) FY Dec 2010A 2011A 2012F 2013F FY Dec 2010A 2011A 2012F 2013F Turnover 1, , , ,975.9 Fixed Assets EBITDA Other LT Assets 1, , , ,075.5 Depreciation & Amortisation (16.3) (9.1) (9.6) (10.0) Cash/ST Investments 1, Operating Profit Other Current Assets 1, , , ,756.0 Associates Total Assets 4, , , ,018.2 Interest (Exp)/Inc (40.0) (44.2) (38.4) (39.6) Exceptional Items ST Debt Pre-Tax Profit Other Current Liabilities 1, ,174.2 Tax (47.9) (44.6) (54.7) (76.5) LT Debt 1, Minority Interest (68.5) (0.5) (2.4) (11.0) Other LT Liabilities Net Profit Minority Interest Recurring Net Profit Shareholders' Equity 1, , , ,741.1 Total Liabilities-Capital 4, , , ,018.2 Revenue Growth % (63.4) (9.9) EBITDA Growth (%) 5.5 (13.3) Share Capital (m) EBIT Growth (%) 9.7 (11.4) Net Debt Net Profit Growth (%) Working Capital Recurring Net Profit Growth (%) (19.2) Gross Gearing % Tax Rate % CASH FLOW (RM m) RATES & RATIOS FY Dec 2010A 2011A 2012F 2013F FY Dec 2010A 2011A 2012F 2013F Profit after taxation EBITDA Margin % Depreciation Op. Profit Margin % Net interest receipts/(payments) (40.0) (31.4) Net Profit Margin % Working capital change (247.7) (0.2) (21.9) (64.0) ROE % Cash tax paid (13.8) (32.8) (54.7) (76.5) ROA % Others (incl'd exceptional items) 19.5 (6.2) Net Margin Ex. El % Cash flow from operations Dividend Cover (x) Capex (3.5) 6.0 (60.0) (60.0) Interest Cover (x) Disposal/(purchase) Asset Turnover (x) Others (51.8) (278.9) Asset/Debt (x) Cash flow from investing (55.2) (272.9) (60.0) (60.0) Debtors Turn (days) Debt raised/(repaid) (278.2) (99.6) 51.3 Creditors Turn (days) Equity raised/(repaid) Inventory Turn (days) Dividends (paid) (59.1) (60.4) (60.4) (60.4) Net Gearing (x) Interest payments (59.8) (60.0) Debt/ EBITDA (x) Others (1.8) (0.2) Debt/ Market Cap (x) Cash flow from financing (252.4) (219.8) (68.1) EV/EBITDA (x) Change in cash (379.2) (79.7) 87.0 Sources: Company, Maybank-IB 15 March 2012 Page 3 of 5

4 APPENDIX 1 Definition of Ratings Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 15% in the next 12 months HOLD Total return is expected to be between -15% to 15% in the next 12 months SELL Total return is expected to be below -15% in the next 12 months Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forwardlooking statements. Maybank Investment Bank Berhad expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Berhad's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. 15 March 2012 Page 4 of 5

5 APPENDIX 1 Additional Disclaimer (for purpose of distribution in Singapore) This report has been produced as of the date hereof and the information herein maybe subject to change. Kim Eng Research Pte Ltd ("KERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to contact KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 15 March 2012, KERPL does not have an interest in the said company/companies. Additional Disclaimer (for purpose of distribution in the United States) This research report prepared by Maybank Investment Bank Berhad is distributed in the United States ( US ) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Kim Eng Securities USA, a brokerdealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Kim Eng Securities USA in the US shall be borne by Kim Eng. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Kim Eng Securities is permitted to provide research material concerning investments to you under relevant legislation and regulations. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply if the reader is receiving or accessing this report in or from other than Malaysia. As of 15 March 2012, Maybank Investment Bank Berhad and the covering analyst does not have any interest in in any companies recommended in this Market themes report. Analyst Certification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Additional Disclaimer (for purpose of distribution in the United Kingdom) This document is being distributed by Kim Eng Securities Limited, which is authorised and regulated by the Financial Services Authority and is for Informational Purposes only.this document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers. Published / Printed by Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, Kuala Lumpur Tel: (603) ; Fax: (603) Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof Kuala Lumpur Tel: (603) ; Fax: (603) March 2012 Page 5 of 5