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WCT Plunges as $1.3 Billion Dubai Order Is Canceled (Update1) |
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1/6/2009 12:33:43 AM |
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WCT Bhd. plunged the most in almost 14 years in Kuala Lumpur trading after the Malaysian engineering company’s $1.3 billion contract to build a racetrack in Dubai was canceled.
The stock lost 30 percent to 1.29 ringgit, set for the biggest drop since at least February 1995, before being halted until 2:30 p.m. local time today. WCT and Arabtec Holding PJSC won the 4.6 billion-dirham ($1.3 billion) contract in September 2007 from Meydan LLC.
The horseracing track, built for the sport’s richest event, the 2010 Dubai World Cup, was designed to be the new home of the Dubai Racing Club. The contract, which Reuters said was canceled after a missed deadline, was expected to account for 37 percent of WCT’s profit this year, according to JPMorgan Chase & Co.
“This is very negative,” Jon Oh, an analyst at JPMorgan in Kuala Lumpur with an “overweight” rating on WCT, said in a report today. “This sudden cancellation has rendered much doubt and uncertainties on the business model.”
WCT, based in Shah Alam, outside Kuala Lumpur, has been targeting projects in the Gulf, and is also building a Formula One circuit in the United Arab Emirates.
The decision by Meydan, which is overseeing the development of the racecourse, is a breach of contract and WCT is “considering all its options,” the Malaysian company said today in a statement to the stock exchange in Kuala Lumpur.
Unpaid Work
Almost 60 percent of the contract is complete and the partners have been paid for 28 percent of the value of the work, according to JP Morgan’s Oh, who said he spoke to WCT management today. They haven’t been reimbursed for further work valued at 500 million ringgit ($143 million), Oh said in his report.
WCT Managing Director Taing Kim Hwa is overseas and unavailable, said his secretary. Executive Director Loh Siew Choh didn’t return messages left at his office seeking comment.
The new Nad Al Sheba racetrack was to include a luxury hotel and a 60,000-capacity grandstand, Meydan said in 2007. Growth in United Arab Emirates, the second-biggest Arab economy, may slow to 2.7 percent in 2009 and 3.5 percent in 2010, led by a slump in real estate and banking, Standard Chartered Plc said last month.
The racecourse contract’s completion date was Oct. 7, 2009, and the venture was due to be paid as work was carried out. WCT, which didn’t give a reason for the cancellation in its statement, said Meydan gave 14 days notice.
Arabtec, building the world’s tallest tower in Dubai, yesterday rose 15 percent to 2.59 dirhams in Dubai. WCT’s announcement today was made before the Dubai market opens. |
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Source: Bloomberg.com |
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