Regarding WCT Land again.
Friday, October 27, 2006
Previous posting on WCT Land can be found here
Just received a comment made by Annon to John. And since the original posting is buried deep in the blog, I thought I reproduce the blog posting and all its replies again.
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- Would be very much appreciate if you could share your opinions, good or bad, on WCTLAND.
WCT Land is the property arm of WCT Enginerring. It was listed at end 2004 via the reverse takeover of Bescorp Industries.
And under part of the takeover exercise, some loan stocks were issued. ( see this announcement ).
The issue to note is the straight conversion (no cash involved) of 1 loan stock into 2 new ordinary shares upon expiry (do note, there's an option to convert early but the condition isn't as attractive. These loan stocks has a 5-year maturity and expires in 2009. Currently there are 120 million loan stock shares and 321.900 million ordinary shares of WCT Land. And depending on your personal investing strategy, do not discount the dilution effects caused by the loan stocks. Meaning to say, if you are a shorter term investor, then this issue is not going to effect you that much but if you believe that WCT Land has a great prospect in the future and plan to buy and hold for a couple of years, then you should be aware that your earnings could be drastically diluted when these loan stocks are converted into ordinary share.
WCT Land's main development project and its main forte is the BBT project (Bandar Bukit Tinggi) in Klang. The size of this project stated back in 2004 was around 534 ha. As you know, the Bandar Bukit Tinggi is in the Southern Klang region and is now known as the commercial hub of Klang. And for some investors, some might be concerned over this factor, for they view a developer with just one main project as risky and also they might be a bit biased over its future prospect. And perhaps this could be one of the reasons why the performance of the stock is rather lacklusture since its listing.
Which is why the need for this developer to expand beyond BBT. And recently there was an article in the Edge Daily titled: WCT Land's RM196m project in Kota Kinabalu.
This stock is extensively covered by both Affin Securities and Standard and Poors and can be viewed at Bursa eResearch website.
Thanks for your sharing.
I have few questions regards WCTL 2005 financial report vs 2004. Hope you can help.
No doubt WCTL had posted a good result in PBT & PAT. But I have few quesries regards it's Balance Sheet & Cash Flow.
1. Cash is increased from 172mil to 206mil (+34mil), but it has new drawdown of term loan 72mil. Is this healthy?
2. I am doubt with it's Cash Flow especially on "Change in working capital" segment. Why suddenly all criterias in this segment increase so much compared to 2004? Anything goes wrong?
3. In overall of it's cash flow, WCTL actually shows negetive flow in 2005, if he did not drawdown it's new term loan of 72mil. Am I right?
Cheers. posted by : 2:45 PM
I am not too sure since I really do not follow this stock at all. Anyway gimme sometime to check on it.
Cheers!
Gnerally, when the cash is increased because of a loan, one has to be prudent to see where the money is going into. For WCT land, you just have to check and see the reason for the loan and where WCT Land is spending the loan. Is the loan used as capital expenditure in new development projects? Has bought any new land? Has entered into any jv? etc, etc.
On the 'working capital' thingy. Sorry me not accountant. So I am not too sure what is happening here.
How do I rate its cash flow right now? Hard to say and definately too early to pass judgement. As it is, WCT Land is one township champion. Hence, it is utmost important that it ventures into new areas, new projects. Hence, there could be some justifications here.
ok?
To answer some of your questions on WCT Land's Cash Flow;-
1. Most property development companies may sometimes face timing recognition on their billings to customers and billings from suppliers. Hence, that may explain the high working cap.
2. For property developers in Malaysia, majority of the cash is locked under Housing Development Act (HDA), whereby no other usage is allowed except for payments for expenses related to building costs on sold residential property. Commercial properties are not subject to HDA.
3. From its 2005 Annual Report, it mentioned that they acquired two pieces of development land in Kelana Jaya and Kota Kinabalu for major commercial and high-end residential properties respectively. Hence, the cash outflow. Also, WCT Land starts to venture out of Klang and into other types of development, which I personally view as a positive move.
4. Recently, if you catch the story, Jusco has signed up a 25 Years Lease with subsi of WCT Land to manage the AEON Bukit Tinggi Shopping Centre, the largest in Malaysia. I wonder if that of Klang gonna be another Bandar Utama.
5. One downside or upside (depends on how you perceive the stock) of WCT Land's share price is that it is trading within its NTA but 40% less its IPO price. Perhaps, as the old saying is that property counters in Malaysia tend to be slower compared to other sector.
Hope these helps.
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