MARC Affirms WCT Holdings Debt and Sukuk Ratings; Revises Outlook to Stable from Negative

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1. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications MARC​ ​Affirms​ ​WCT​ ​Holdings'​ ​Debt​ ​and​ ​Sukuk Ratings;​ ​Revises​ ​Outlook​ ​to​ ​Stable​ ​from Negative 27​ ​October​ ​2017 MARC​ ​has​ ​affirmed​ ​its​ ​ratings​ ​on​ ​WCT​ ​Holdings​ ​Berhad's​ ​(WCT​ ​Holdings)​ ​RM1.0​ ​billion Medium-Term​ ​Notes​ ​(MTN)​ ​Programme​ ​and​ ​RM1.5​ ​billion​ ​Sukuk​ ​Murabahah​ ​Programme​ ​at AA-​ ​and​ ​AA-IS​ ​respectively.​ ​Concurrently,​ ​MARC​ ​has​ ​revised​ ​the​ ​ratings​ ​outlook​ ​to​ ​stable​ ​from negative.​ ​The​ ​current​ ​outstanding​ ​under​ ​the​ ​MTN​ ​Programme​ ​and​ ​Sukuk​ ​Murabahah Programme​ ​are​ ​RM1.0​ ​billion​ ​and​ ​RM950.0​ ​million​ ​respectively. The​ ​outlook​ ​revision​ ​incorporates​ ​WCT​ ​Holdings'​ ​improving​ ​liquidity​ ​and​ ​leverage​ ​positions following​ ​a​ ​share​ ​placement​ ​exercise​ ​and​ ​warrant​ ​conversion.​ ​Cash​ ​injections​ ​from​ ​the​ ​equity issuances​ ​amounted​ ​to​ ​RM260.8​ ​million​ ​in​ ​1H2017,​ ​which​ ​could​ ​potentially​ ​increase​ ​by​ ​another RM204.4​ ​million​ ​on​ ​the​ ​expected​ ​completion​ ​of​ ​new​ ​placement​ ​of​ ​shares​ ​in​ ​2018.​ ​Coupled​ ​with proceeds​ ​from​ ​asset​ ​monetisation​ ​in​ ​the​ ​near​ ​term,​ ​total​ ​debt​ ​is​ ​expected​ ​to​ ​reduce​ ​by​ ​about RM550.1​ ​million,​ ​leading​ ​to​ ​a​ ​pro​ ​forma​ ​net​ ​debt-to-equity​ ​(DE)​ ​of​ ​about​ ​0.65​ ​times.​ ​WCT Holdings'​ ​consolidated​ ​debt​ ​stood​ ​at​ ​RM3.2​ ​billion​ ​with​ ​a​ ​net​ ​DE​ ​ratio​ ​of​ ​0.85​ ​times​ ​as end-1H2017.​ ​MARC​ ​expects​ ​net​ ​DE​ ​to​ ​further​ ​improve​ ​with​ ​cash​ ​inflows​ ​from​ ​reductions​ ​in​ ​the group's​ ​inventory​ ​of​ ​completed​ ​properties​ ​and​ ​sale​ ​of​ ​land​ ​estimated​ ​to​ ​net​ ​about​ ​RM300.0 million. The​ ​ratings​ ​affirmation​ ​is​ ​supported​ ​by​ ​the​ ​improvement​ ​in​ ​the​ ​operating​ ​performance​ ​of​ ​WCT Holdings'​ ​construction​ ​segment,​ ​complemented​ ​by​ ​the​ ​modest​ ​but​ ​stable​ ​revenue​ ​stream​ ​from its​ ​property​ ​investment​ ​segment.​ ​These​ ​factors​ ​notwithstanding,​ ​the​ ​weak​ ​performance​ ​of​ ​its property​ ​development​ ​segment​ ​remains​ ​a​ ​key​ ​moderating​ ​factor. WCT​ ​Holdings'​ ​operating​ ​performance​ ​is​ ​expected​ ​to​ ​improve​ ​over​ ​the​ ​near​ ​term​ ​on​ ​better margins​ ​in​ ​the​ ​construction​ ​segment​ ​which​ ​contributed​ ​72.4%​ ​and​ ​54.9%​ ​to​ ​group​ ​revenue​ ​and operating​ ​profit​ ​respectively​ ​in​ ​1H2017.​ ​Its​ ​order​ ​book​ ​is​ ​diversified​ ​with​ ​domestic​ ​external infrastructure​ ​projects​ ​accounting​ ​for​ ​82.8%​ ​of​ ​the​ ​outstanding​ ​balance​ ​of​ ​RM6.1​ ​billion (end-2016:​ ​RM5.3​ ​billion).​ ​The​ ​property​ ​investment​ ​segment,​ ​comprising​ ​BBT​ ​Mall​ ​and Premiere​ ​Hotel,​ ​contributed​ ​3.6%​ ​and​ ​17.5%​ ​of​ ​group​ ​revenue​ ​and​ ​operating​ ​profit​ ​respectively. Contributions​ ​from​ ​this​ ​segment​ ​will​ ​decline​ ​upon​ ​the​ ​successful​ ​completion​ ​of​ ​the​ ​Real​ ​Estate Investment​ ​Trust​ ​(REIT)​ ​listing.
2. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications In​ ​the​ ​property​ ​development​ ​segment,​ ​WCT​ ​Holdings​ ​targets​ ​sales​ ​of​ ​RM500.0​ ​million​ ​by mid-2018​ ​primarily​ ​from​ ​its​ ​inventory​ ​of​ ​completed​ ​properties​ ​at​ ​gross​ ​development​ ​value​ ​(GDV) estimates​ ​totalling​ ​RM643.4​ ​million.​ ​Its​ ​near-term​ ​strategy​ ​to​ ​attract​ ​demand​ ​with​ ​more​ ​attractive repricing​ ​packages​ ​is​ ​expected​ ​to​ ​yield​ ​positive​ ​cash​ ​flows​ ​but​ ​may​ ​compress​ ​profit​ ​margins. Ongoing​ ​property​ ​development​ ​projects​ ​have​ ​a​ ​combined​ ​GDV​ ​of​ ​RM866.0​ ​million​ ​with​ ​a modest​ ​take-up​ ​rate​ ​of​ ​52.1%​ ​as​ ​at​ ​end-June​ ​2017.​ ​Total​ ​sales​ ​for​ ​8M2017​ ​was​ ​RM187.0 million​ ​while​ ​total​ ​sales​ ​pending​ ​completion​ ​was​ ​RM83.6​ ​million.​ ​Contracted​ ​sales​ ​of​ ​RM322.0 million​ ​would​ ​provide​ ​earnings​ ​visibility​ ​for​ ​the​ ​next​ ​three​ ​years.​ ​While​ ​plans​ ​to​ ​withhold​ ​new launches​ ​amid​ ​the​ ​soft​ ​property​ ​market​ ​conditions​ ​are​ ​credit​ ​positive,​ ​MARC​ ​opines​ ​that​ ​any land​ ​acquisitions​ ​would​ ​exert​ ​pressure​ ​on​ ​the​ ​ratings​ ​unless​ ​the​ ​group's​ ​financial​ ​metrics​ ​have been​ ​restored​ ​to​ ​the​ ​anticipated​ ​levels. For​ ​unaudited​ ​1H2017,​ ​operating​ ​profit​ ​improved​ ​by​ ​14.4%​ ​y-o-y​ ​to​ ​RM95.6​ ​million​ ​although revenue​ ​declined​ ​by​ ​19.6%​ ​y-o-y​ ​to​ ​RM856.7​ ​million.​ ​The​ ​higher​ ​profit​ ​is​ ​mainly​ ​due​ ​to​ ​higher margin​ ​infrastructure​ ​projects​ ​in​ ​the​ ​construction​ ​segment.​ ​The​ ​group​ ​reported​ ​negative​ ​cash flow​ ​from​ ​operations​ ​(CFO)​ ​and​ ​free​ ​cash​ ​flow​ ​(FCF)​ ​of​ ​RM194.3​ ​million​ ​and​ ​RM268.5​ ​million respectively​ ​in​ ​1H2017,​ ​which​ ​were​ ​largely​ ​funded​ ​by​ ​proceeds​ ​of​ ​RM260.8​ ​million​ ​from​ ​equity issuances.​ ​The​ ​negative​ ​cash​ ​flows​ ​are​ ​expected​ ​to​ ​taper​ ​off​ ​towards​ ​end-2017​ ​with​ ​the completion​ ​of​ ​Paradigm​ ​Mall​ ​Johor​ ​Bahru,​ ​the​ ​significantly​ ​lower​ ​property​ ​development expenditure​ ​which​ ​was​ ​predominant​ ​from​ ​2013​ ​to​ ​2016,​ ​and​ ​the​ ​likelihood​ ​of​ ​no​ ​major​ ​capex being​ ​incurred​ ​in​ ​the​ ​near​ ​term. WCT​ ​Holdings​ ​has​ ​sufficient​ ​liquidity​ ​to​ ​meet​ ​current​ ​debt​ ​maturities​ ​of​ ​RM462.1​ ​million (RM262.1​ ​million​ ​has​ ​been​ ​refinanced).​ ​MARC​ ​considers​ ​the​ ​group's​ ​financial​ ​flexibility​ ​to​ ​be good​ ​in​ ​view​ ​of​ ​its​ ​ability​ ​to​ ​tap​ ​the​ ​equity​ ​market,​ ​unutilised​ ​bank​ ​credit​ ​limit​ ​of​ ​RM556.9​ ​million, undrawn​ ​limit​ ​on​ ​the​ ​rated​ ​Sukuk​ ​of​ ​RM550.0​ ​million​ ​and​ ​potential​ ​net​ ​proceeds​ ​from​ ​asset disposals. The​ ​stable​ ​outlook​ ​incorporates​ ​MARC's​ ​expectations​ ​that​ ​WCT​ ​Holdings​ ​would​ ​exercise prudent​ ​capital​ ​spending​ ​such​ ​that​ ​the​ ​group's​ ​credit​ ​metrics​ ​would​ ​improve​ ​and​ ​are commensurate​ ​with​ ​the​ ​affirmed​ ​ratings.​ ​Rating​ ​pressure​ ​could​ ​arise​ ​if​ ​the​ ​group's​ ​leverage​ ​and liquidity​ ​positions​ ​start​ ​to​ ​deteriorate​ ​or​ ​if​ ​negative​ ​cash​ ​flows​ ​persist.​ ​The​ ​ratings​ ​would​ ​also​ ​be lowered​ ​if​ ​subsidiary-level​ ​borrowings​ ​increase​ ​or​ ​the​ ​holding​ ​company's​ ​debt​ ​obligations​ ​are subordinated​ ​to​ ​those​ ​of​ ​the​ ​operating​ ​subsidiaries. Organisation​ ​Name: News​ ​Type: Malaysian​ ​Rating​ ​Corporation​ ​Berhad​ ​(MARC) RATING​ ​ANNOUNCEMENT
3. IB ​ ​Press​ ​Release​ ​Service Published​ ​on:​​ ​IslamicBanker.com​ ​Publications:​ ​https://www.islamicmarkets.com/publications Source: BNM​ ​Announcements Media​ ​Contact Wan​ ​Abdul​ ​Muiz​ ​Wan​ ​Abdul​ ​Ghafar,​ ​+603​ ​2717​ ​2939 muiz@marc.com.my; Yap​ ​Lai​ ​Ken,​ ​+603​ ​2717​ ​2947 laiken@marc.com.my Disclaimer: This​ ​communication​ ​is​ ​provided​ ​by​ ​Malaysian​ ​Rating​ ​Corporation Berhad​ ​(MARC)​ ​on​ ​the​ ​basis​ ​of​ ​information​ ​believed​ ​by​ ​MARC​ ​to​ ​be accurate​ ​and​ ​reliable​ ​as​ ​derived​ ​from​ ​publicly​ ​available​ ​sources​ ​or provided​ ​by​ ​the​ ​rated​ ​entity​ ​or​ ​its​ ​agents.​ ​MARC,​ ​however,​ ​has​ ​not independently​ ​verified​ ​such​ ​information​ ​and​ ​makes​ ​no​ ​representation as​ ​to​ ​the​ ​accuracy​ ​or​ ​completeness​ ​of​ ​such​ ​information.​ ​Any assignment​ ​of​ ​a​ ​credit​ ​rating​ ​by​ ​MARC​ ​is​ ​solely​ ​to​ ​be​ ​construed​ ​as​ ​a statement​ ​of​ ​its​ ​opinion​ ​and​ ​not​ ​a​ ​statement​ ​of​ ​fact.​ ​A​ ​credit​ ​rating​ ​is not​ ​a​ ​recommendation​ ​to​ ​buy,​ ​sell,​ ​or​ ​hold​ ​any​ ​security.