[MARC] MARC Ratings revises WCT Holdings’ outlook to positive

MARC Ratings has affirmed its ratings on WCT Holdings Berhad’s (WCT) debt and sukuk programmes, and revised the ratings outlook to positive from stable.

The positive outlook has factored in the potential improvement in the group’s balance sheet from the utilisation of part proceeds from WCT’s disposal of three mall assets into Paradigm Real Estate Investment Trust (REIT), established on March 13, 2025, and expected to be listed on Bursa Malaysia on June 10, 2025. The group’s three malls — Bukit Tinggi Shopping Centre, Klang; Paradigm Mall, Petaling Jaya; and Paradigm Mall, Johor Bahru — that will be injected into the REIT will generate net proceeds of about RM1.4 billion; this will be used to pare down group borrowings and repay debts attached to these malls. As a result, group consolidated borrowings and adjusted gross debt-to-equity (DE) ratio are expected to reduce to RM2.8 billion and 0.81x, from RM4.1 billion and 1.20x as at end-March 2025.

The rating action has also considered that proceeds from further disposals of some of WCT’s key hotel assets into the REIT, earmarked by end-1Q2026, would lead to further strengthening of the group’s balance sheet with gross DE improving to about 0.70x. Aside from this corporate exercise, MARC Ratings also notes the upside to near-term earnings visibility from variation order payments of around RM500.0 million from construction contracts and outstanding unbilled sales of about RM1.2 billion from its property development division (1Q2024: RM731.0 million).

WCT’s established position and long operational track record in the construction industry and property development remain key drivers for the rating affirmation. Construction order book, which stood at RM2.5 billion as at end-1Q2025, has remained suppressed in recent years although this is likely to improve given WCT’s ability to secure domestic and international construction contracts. In regard to property development, WCT’s ongoing key projects in Kuala Lumpur (WCity OUG) and Johor Bahru (Adison) provide support for future earnings; total gross development value (GDV) stood at RM2.9 billion as at end-March 2025 (1Q2024: RM2.3 billion). Post-REIT listing, the property investment division will continue to generate income through dividends from the REIT in which WCT will have an effective stake of 60.7%, as well as continued profit contribution from other assets such as the airport malls and hotel assets which have seen improved occupancy.

As at end-1Q2025, group operating profit grew by 3.2% y-o-y to RM73.5 million, mainly supported by stronger progress billings and sales of property inventory, as well as higher contribution from the property investment division, offsetting the lower construction income. MARC Ratings will monitor WCT’s performance; a rating upgrade will be guided by the strengthening of the group’s business profile, particularly its construction order book prospects, and its key credit metrics as projected through a disciplined approach to balance sheet management.

The group’s rated issuances are as follows:
• RM1.0 billion Medium-Term Notes (MTN) Programme with a rating of A+/positive
• RM1.5 billion Sukuk Murabahah Programme with a rating of A+IS/positive
• RM1.0 billion Perpetual Sukuk Musharakah Programme with a rating of A-IS/positive

Vanessa Leong, +603-2717 2931/ xinyue@marc.com.my
Cyndy Goh, +603-2717 2941/ cyndy@marc.com.my
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my