KUALA LUMPUR, 14 JULY: According to CGS-CIMB Research, the RM828 million settlement announced today by WCT Holdings Bhd for its aborted Dubai racetrack development project following a 12-year battle should remove the overhang on its share price linked to unresolved contract arbitrations. However, the research firm did not change its values and predictions for the developer in today’s note, pending additional information on how the revenues will be used.
The settlement amounts to around 58.33 sen per share, based on WCT’s 1.42 billion outstanding shares. Based on the group’s closing share price of 55 sen on Wednesday, the settlement amount is more than the group’s market capitalisation of RM772.48 million.
WCT aims to pay off its RM200 million sukuk with the initial payment and first tranche of settlement, totaling roughly RM360 million, by October, according to CGS-CIMB. The remaining funds will be used to cover working capital needs.
WCT has RM320 million in receivables related to the Nad Al Sheba project, according to the report.
“Given the continuing arbitration processes and the probability of a favorable outcome,” the research house added, “the group has not made any provisions.”
“The initial payment plus the first instalment, we anticipate, will lower net gearing from 0.66x at the end of March 2021 to 0.57x. We predict that net gearing will reduce to 0.47x by the end of the following three years if the entire settlement payment is used to repay borrowings “It was stated.
“The overall projected impact of fewer borrowings would improve our revalued net asset value (RNAV) and target price (TP) by as much as 10% (+8 sen),” the research house stated, but no estimates have been changed upwards at this time.
According to the research firm, the Nad Al Sheba Racecourse project issue has been WCT’s largest arbitration in terms of value due to legacy international contracts.
The contract, which was terminated in 2009 by Meydan LLC due to a delay in the joint venture company’s part of the job, was partnered by WCT’s wholly-owned WCT Bhd (WCTB) and Arabtec Construction LLC.
The WCTB-Arabtec JV had completed around 65 percent of the job, which comprised the construction of the main building, external and infrastructure work, and had hired nominated subcontractors to execute various aspects of the job, according to reports at the time.
Meydan reached an agreement with WCT for AED726.57 million (about RM828.25 million), which is 65 percent of the principal sum of AED1.15 billion awarded to WCTB by Dubai’s Arbitral Tribunal in the dispute’s final judgement.
This is WCT’s second piece of excellent news this month. On July 8, the business stated that its joint venture had won an RM899.81 million contract to expand Sabah’s Sapangar Bay Container Port, helping it outperform analysts’ forecasts for contract replenishment this year.
WCT’s stock rose 3.5 sen, or 6.8%, to 55 sen today, valuing the company at RM772.48 million.
WCT Holdings unit receives RM828 million in final settlement of Dubai racetrack dispute/n
