WCT Holdings Bhd (WCT) and Malaysia Airports Holdings Bhd (MAHB) inked an agreement to extend the joint venture (JV) company, Segi Astana SB’s (SASB) concession periodof by a further 22 years till 2069 to operate gateway @ KLIA2. As part of the concession extension, the issuance and allotment of additional shares to MAHB will dilute WCT’s equity interest to 53% from 70%. The concession extension and the change in WCT’s interest in SASB will result in a revaluation gain approximately RM184m or RM0.13 per share. While we are positive on this development, we make no changes to our core earnings forecast as this has no cashflow impact. We keep our Underperform call on WCT with TP revised to RM0.44 (previously RM0.42), pegged at 0.15x PBV (-1SD).

• Concession details. In 2011, MAHB and WCT signed the principalconcession agreement to grant SASB the concession on gateway@klia2 for a period of 25 years with an extension option of another 10years. The 10-year extension option was later exercised and extendedto 2047. In March 2024, MAHB and the government inked newoperating and land lease agreement that extended MAHB’sconcession to Feb 2069, from 2034 previously.

• Details of the Supplemental Agreement. SASB is 70% owned byWCT, with the remaining 30% stake held by MAHB. As part of theconcession extension, SASB will issue 34.02m shares or 32.08% ofits enlarged share base to MAHB. Consequently, WCT’s equityinterest will be diluted to 53% from 70%. No change to WCT’s 86mnon-voting redeemable preference shares in SASB.

• Revaluation gain of RM184m. The concession extension and theallotment of additional shares to MAHB will result in a change in WCT’sinterest in SASB and bring about a revaluation gain of approximatelyRM184m or RM0.13 per share.

Source: PublicInvest Research - 29 May 2024