WCT’s malls could recover by 4Q

An analyst expects the group to intensify its bonanza vouchers and loyalty programmes to capitalise on the domestic year-end spending

by SHAFIQQUL ALIFF / Pic credit: wct.com.my

WCT Holdings Bhd’s property investment division is poised to begin recovering by the fourth quarter this year (4Q21) with the relaxation of restrictions under the National Recovery Plan (NRP).

CGS-CIMB Securities Sdn Bhd analyst Sharizan Rosely forecast the worst could be over for its retail malls post-lockdown in 3Q21F.

While the average occupancy rates for WCT’s five retail malls as at end-June stood at 81% to 100%, he stated that the average rental reversion outlook for financial year 2021 forecast (FY21F) remains in negative territory with most of the tenancies expiring in FY21F renewed.

“The likelihood of further rental assistance is high in the second half of the 2021 forecast (2H21F), although the quantum could be lower versus 1H21 considering the relaxation of standard operating procedures under the NRP’s Phase 1,” Sharizan wrote in a research report on Monday.

CGS-CIMB believes that total rental assistance in FY21F could either match or exceed FY20’s RM50 million.

Sharizan expects the group would intensify its bonanza vouchers and loyalty programmes to capitalise on the domestic year-end spending in 4Q21F.

He noted that recovery signs for the group’s hotel operations are expected in 4Q21F, lagging behind the retail malls, as domestic travel remains restricted.

CGS-CIMB has maintained its ‘Add’ call on WCT with a higher target price of 70 sen after revising numerous balance sheet items and applying a reduced revalued net asset value discount of 50% to reflect a potential NRP-driven recovery in 2H21.

Sharizan noted that WCT maintained its RM1 billion total property sales target in FY21F as it achieved RM362 million in at the end-June, mainly driven by the sale of completed inventory (30% reduction in property inventory).

WCT planned to launch five new high-rise residential condominiums in 2Q22 with a total gross development value of RM3.5 billion that comprises 3,604 units.

For the construction division, Sharizan said the domestic market would be the main driver in 2H21F.

Year-to-date (YTD), the group has submitted a few tenders and is preparing for several new tenders.

Overall, the total size of the tender book is RM10 billion.

“Based on our RM1.5 billion total contract win assumption for FY21F and WCT’s total wins of RM1.1 billion YTD, the group could secure RM383 million in new contracts in the second half of the calendar year 2021.

“We believe the group is in the running to secure a civil works package from the Pan Borneo highway Sabah project. At end-June, its total outstanding orderbook stood at RM5.4 billion,” the analyst wrote.

WCT’s 2Q21 net profit increased to RM16.12 million, more than doubled from RM7.42 million in the corresponding quarter a year ago.

Revenue rose 16.2% to RM435.62 million, compared with RM374.95 million last year.

The property development revenue for the six months surged 62% year-on-year as it included RM134 million in land sale proceeds, excluding the RM61 million land sale gain.

Sharizan expects improved progress billings post-lockdown and potential contract wins are key recovery signs in 4Q21F, albeit still a tough period for malls and hotels.