8 September 2012
WCT Bhd’s shares had fallen slightly in tandem with the sharp two-day slump on the local bourse recently, but recovered to close 9 sen higher to RM2.63 yesterday.
On Thursday, the construction and property development group had proposed a bonus issue on the basis of three bonus shares for every 20 existing 50-sen shares, and one warrant D for every five shares held on the entitlement date. Many research analysts were positive about the corporate proposals, and maintained their “buy” calls on the stock.
HwangDBS Vickers Research points out that this is not an exercise to raise capital but more to increase trading liquidity and reward shareholders.
The research house says it does not expect any significant earnings dilution given the long tenure of the warrants but based on an extreme scenario of full conversion of the warrants, there may be a 20% dilution to financial year 2013 forecast earnings. “In terms of our sum-of-the-parts, assuming the exercise price is fixed at RM2.25/share, the dilution is around 8%.”
Meanwhile, OSK Research deems the corporate proposals as a move that may boost trading sentiment on WCT’s shares over the immediate term. It notes that WCT has a order book of RM3.7bil with more contracts likely to be awarded before year-end. “There are potential growth catalysts from the klia2 Integrated Complex, which is scheduled to commence operations by March next year.”
HwangDBS Vickers’s target price for WCT’s stock is RM3.75 while OSK Research’s fair value for it is RM3.36 or RM2.92 ex-bonus issue.