KUALA LUMPUR (July 15): WCT Holdings Bhd rose as much as 2.5 sen or 4.5% to 57.5 sen this morning, a day after it was announced that its wholly-owned subsidiary WCT Bhd (WCTB) had entered into a settlement agreement with Meydan Group LLC.
At the time of writing, the counter had pared some gains but was still up 1.5 sen or 2.73% to trade at 56.5 sen from its close of 55 sen on Wednesday.
Yesterday, WCT Holdings had announced that under the settlement agreement, Meydan will pay WCTB AED726.57 million (about RM828.25 million) in a full and final settlement linked to the Nad Al Sheba Dubai Racecourse contract dispute between the two parties.
In a Bursa Malaysia filing yesterday, builder WCT Holdings announced that the settlement amount is equivalent to 65% of the principal sum of AED1.15 billion awarded to WCTB earlier by Dubai’s Arbitral Tribunal under the final award in relation to the dispute.
According to WCT Holdings, Meydan will pay the RM828.25 million final settlement sum in two portions, under which the second tranche will be divided into 12 equal quarterly instalments.
CGS-CIMB Research opined that the RM828 million settlement announced which WCT Holdings has secured for its cancelled Dubai racecourse development job after 12 years of dispute, should remove the overhang on its share price relating to outstanding contract arbitrations.
“We view this positive development as timely considering the cashflow strains and earnings risks brought about by the ongoing Covid-19 lockdowns. WCT will utilise the incoming total cash of RM361 million (due on July 20 and Oct 20) mainly for Sukuk repayment of circa RM200 million (due in October) and the remaining RM161 million for working capital purposes, primarily to defray operating fixed costs across all its divisions (construction, property development, and property investment — retail malls and hotels); implying a negligible impact to FY21F EPS,” noted CGS-CIMB, reiterating its "add" call and target price for the stock at 67 sen.