WCT's joint venture with Southern Land Corp to develop 11.5 acres in Ho Chi Minh City, a project in which the former has a 70% stake. The project is earmarked for a middle-to-high class residential and commercial development.
WCT's management had given a sort of guide that its gross development value (GDV) could fetch up to RM700mil over the next five years. However, industry observers say the new Vietnam property project had an estimated GDV of RM500mil. The latest development given the expected long gestation period.
This would be the second project for WCT, whose other project comprises an integrated development on 22.2 acres in the Vietnamese capital.
Current global economic conditions as well as high inflation and the devalued dong are the stumbling blocks in the short term. In October 2011, in order to subdue Asia's highest rate of inflation, Vietnam's central bank raised its refinancing rate to 15% from 14% previously, while maintaining its base interest rate at 9%. The country's inflation for December 2011 was 18.1% year-on-year after rising 19.8% in November 2011.
What this means is that the credit crunch in Vietnam has resulted in the real estate market becoming very compressed, and a lot of property developments are slowing down or not starting. Certain projects are still moving along but things have been put on hold to a certain degree.
The project had a duration of 50 years from the date of receipt of the investment certificate awarded by the People's Committee of Ho Chi Minh City on Dec 24 2011.
WCT is expected to fork out RM78mil for its equity portion in the new Vietnam property project, and to gear up to RM314mil (assuming operating margin at 20%). As at the third quarter of 2011, WCT's gearing reached 0.9 times with its cash balance at RM1bil. The project financing could further leverage WCT's balance sheet up to 1.07 times, throughout the project period of five years.
The contribution from WCT's new Vietnam property project would only kick in by the company's FY (financial year) 2014.
In 2008, the company was awarded a contract to build the Platinum Plaza shopping mall in Ho Chi Minh City. However, the shopping mall project had not contributed to the company's earnings to date.
WCT is well-known for its three successful Bandar Bukit Tinggi integrated township developments in Klang, which consists of Bandar Bukit Tinggi 1, Bandar Bukit Tinggi 2 and Bandar Parklands-Bukit Tinggi 3. The Bandar Bukit Tinggi developments spans 1,346 acres of freehold land, with over 18,400 units of residential and commercial properties completed.
The company also announced in late October 2011 the acquisition of 468 acres in Rawang for RM38.4mil.
For its third quarter ended Sept 30, 2011, WCT posted a 29% year-on-year increase in net profit to RM39.3mil, due largely to higher contribution from its civil engineering and construction division. Its revenue rose slightly by RM5mil to RM362mil, compared with RM357mil recorded a year earlier.
For the first nine months of 2011, WCT posted a 15% year-on-year jump in net profit to RM114.5mil although its revenue dipped 17% to RM1.05bil (from RM1.27bil in the same period in 2010).
WCT's successful construction contracts are expected to pick up pace in the near term from the Middle East and Malaysia's ETP (Economic Transformation Programme) projects.
WCT's order book presently stood at RM2.5bil (external) with the tender book at RM4bil, mainly derived from Middle East-based tenders.
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