This article first appeared in The Edge Financial Daily on January 11, 2019
WCT Holdings Bhd
(Jan 10, 78.5 sen)
Maintain sell with an unchanged target price (TP) of 68.5 sen: CORE Precious Development Sdn Bhd, a joint venture (JV) on a basis of 20:65:15 between WCT Holding Bhd, CCCG Overseas Real Estate Pte Ltd and China Communications Construction Company (M) Sdn Bhd, held a groundbreaking ceremony on Wednesday to symbolise the commencement of project construction of the first residential project at the Tun Razak Exchange (TRX).
The development consists of two serviced residence towers and one serviced apartment tower, alongside meditation decks, gyms, various gardens and pools. The development carries an estimated gross development value (GDV) of RM1.1 billion.
It was reported that the main building construction contract is being tendered out. Sales preview is targeted by July this year while the official launch of the project is scheduled for November 2019. The development is scheduled to be completed around the end of 2022.
Recall, WCT acquired the 1.65 acres (0.67ha) of freehold land in TRX in 2015 for RM223 million, or RM3,098 per sq ft. Subsequently in 2017, WCT entered into an agreement with JV partners to jointly develop the land. WCT and its JV partners had proportionately paid up a total of RM250 million to subscribe for their respective equity portions.
Based on WCT’s announcement dated Oct 19, 2015, the salient particulars of the land are: i) land area: 71,986 sq ft; ii) floor area ratio: 10.8; and iii) maximum permissible gross floor area: 775,002 sq ft.
Assuming a building efficiency ratio of 0.75 times, the development would have a permissible net floor area of 581,252 sq ft. Based on a GDV of RM1.1 billion, this translates into an average selling price of about RM1,900 per sq ft, which we deem quite reasonable. Based on a projected GDV of RM1.1 billion and a total of 700 residential units, the average selling price is RM1.57 million per unit.
For comparison, based on the second half of 2018 property market research by Knight Frank, recently launched Block B of Agile Bukit Bintang, Block C of Yoo8 @ Conlay, and Windsor Suites at Pavilion Damansara Heights have selling prices of RM1,839 to RM2,107 per sq ft, RM3,262 to RM3,464 per sq ft, and from RM1,700 per sq ft respectively.
With a reasonable pricing, we expect the project to be fairishly accepted amid a challenging property market. This is given its strategic location within the new financial district of Kuala Lumpur, excellent accessibility (direct links between TRX and Smart Tunnel, Maju Expressway, Jalan Tun Razak and Jalan Sultan Ismail) and, last but not least, good connection by mass rapid transit Line 1 (MRT1) and MRT2.
It is understood that the project will be spearheaded by its JV partner.
We maintain our financial year 2018 (FY18) to FY20 earnings forecasts.
No change to our target price of 68.5 sen, based on an unchanged 0.3 times 2019 price-to-book ratio. We maintain our “sell” call. High net gearing level (0.99 times as at end-September 2018) remains a concern. — TA Securities Research, Jan 10