Tuesday, January 06, 2009

More On WCT's Racecourse Project Termination

Posted early this morning: Dubai's Meydan Terminates Racecourse Construstion Deal With WCT!

And it did not shocked me when
WCT slumps 29.5% after Dubai contract cancelled.

Let's trace back in time. The following article was posted on the Edge back in 2007.

  • 19-09-2007: WCT’s RM4.6b Dubai projectto boost earnings
    by Lee Yu Tang

    KUALA LUMPUR: WCT Engineering Bhd and its Dubai-based partner have clinched a RM4.6 billion contract to build the proposed Nad Al Sheba racecourse in Dubai, the United Arab Emirates (UAE).

    The joint venture Arabtec Construction LLC-WCT Engineering JV was awarded the build-only contract for the main building, external works and infrastructure for the racecourse. It was designed by Malaysian architect Teo Ah Khing.

    “The construction period is approximately 25 months with immediate commencement,” it said yesterday.

    Arabtec Construction LLC-WCT Engineering JV is an unincorporated joint venture (JV) between WCT and Arabtec Construction LLC -- a unit of Arabtec Holding PJSC. The rights and liabilities of WCT and Arabtec in the JV are on a 50:50 ratio.

    The one-km long grandstand building would have a capacity of 55,000 to 60,000, a five-star-plus luxury hotel, more than 10 restaurants, museum and gallery, covered car park for more than 10,000.

    HwangDBS Vickers Research said WCT’s 50% share of the project would boost its order book by 54% to RM6.58 billion. It raised the FY08 – FY09 net profit forecast by 12% and 9% respectively to RM161.1 million and RM190.7 million.
    “Our earnings projection is conservative and factors in construction margin of 6%. As such, there is room for further increases in our forecast on higher than expected construction margins. Every 1% increase in margins increases our FY08 net profit by 4%,” said.

    He said in the middle term, there could be the possibility of additional work on the group’s existing profile of mega jobs in the Middle East such as the Dubai World Central International Airport, New Doha International Airport.

    WCT and Arabtec, had in March, constructed the world’s tallest building Burj Dubai. It had also secured RM486 million worth of works for the Dubai World Central International Airport drainage and sewerage system.

    Aseambankers Equity Research said WCT’s share of the racecourse project would raise WCT’s outstanding construction order book to around RM7 billion from RM4.5 billion.

    It said the project reaffirmed WCT’s position in Middle-Eastern construction and provided strong earnings growth in 2008 and earnings visibility into 2009. “Net margins for this project could potentially be 8% to 10%,” it said.

    WCT’s share price, closed 65 sen higher at RM7.25 yesterday, highest ever since July 2005. There were 2.11 million shares done.

Source: http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_1bea0198-cb73c03a-35eed000-1971f5c0

Earnings forecasts had been raised because of this projects.

Earnings visibility had been established for this company.

And now this project is terminated.

I do have a copy of a RHB report on WCT and the impacts on its earnings from this project back in 2007. Here is a screen shot.