Dear Valued Shareholders,
For the year 2009, WCT Group registered a consolidated revenue of RM4.7 billion while recording operating and net profits of RM244 million and RM147 million, respectively.
The Civil Engineering and Construction Division continued to be the main thrust of the Group’s business activities. It contributed RM4.5 billion or 96% to the Group’s consolidated revenue. In terms of operating profits, it achieved RM199 million or 81% of the total operating profits of the Group.
Meanwhile, the Group’s Property Division registered a revenue of RM139 million or 3% of the Group’s consolidated revenue. Operating profit was RM28 million or 11% of the Group’s total operating profits.
Property Investment and Management contributes a recurring flow of income since 2008, derived mainly from rental income at Bukit Tinggi Shopping Mall. In 2009, total revenue from this segment amounted to RM33 million, registering an operating income of RM18 million or 7% of the Group’s total operating profits.
CIVIL ENGINEERING & CONSTRUCTION
In most part of 2009, the global construction industry witnessed a challenging period as a result of the global financial crisis. In view of these circumstances, we remained focused in executing projects in hand and selectively bidding for new jobs in markets we operate in.
At the start of the year, WCT set a modest target of RM1.0 billion new contract orders considering the global economic climate. Despite that, the construction team successfully secured new contracts in the Middle East and Malaysia which totalled RM3.4 billion with WCT’s portion amounting to RM2.7 billion. We continued to secure the confidence of ALDAR Properties PJSC with the award of additional works at the Yas Marina Circuit, Abu Dhabi, which hosted the inaugural Abu Dhabi F1 Grand Prix on 1 November 2009. The Steering Committee of New Doha International Airport in Qatar also extended our job scope with the award of additional works. In Malaysia, as part of the Malaysian Government stimulus package initiatives, we successfully secured the infrastructure works in Medini Iskandar Malaysia covering 2,000 acres of development land. This was followed by the contract award for the earthworks at the new Low Cost Carrier Terminal at the Kuala Lumpur International Airport (KLIA).
Project Description
(2009) Location Contract Value
(RM million)
Yas Marina Circuit – Additional Works Abu Dhabi, U.A.E. 900
Medini Iskandar Malaysia - Infrastructure Works Johor, Malaysia 766
New Doha International Airport – Additional Works Doha, Qatar 1,425
Low Cost Carrier Terminal @ KLIA – Earthworks Selangor, Malaysia 363
Construction activities in Malaysia are expected to expand at a faster pace for the rest of the year with the continuing infrastructure spending attributed to the stimulus package initiatives and the 9th Malaysian Plan. The commitment towards greater transparency and efficiency by the Government will elevate the opportunities offered to competent contractors like WCT. As one of the nation’s most prominent builders in the global market, WCT will remain focused on the domestic market and continue to contribute towards Malaysia’s development.
In the Gulf, the tightening of credit liquidity will not deter long-term public infrastructure spending in the region. WCT has been in the Gulf for 8 years where it successfully built a sound reputation and solid track record. Our Gulf construction profile includes iconic projects such as Formula One circuits in both Bahrain and Abu Dhabi, Bahrain City Centre, Yas Marina Royal Yacht Club in Abu Dhabi and the New Doha International Airport in Qatar. The ability to deliver a world-class project in a timely manner is key to building a solid foundation in order to be successful in securing more projects in the future.
PROPERTY DEVELOPMENT
As a result of the global economic uncertainties and oversupply concerns in the first half of 2009, township developers in Malaysia were generally cautious in launching new products. However, activities in the property market improved in the second half of the year attributed to growing consumer confidence coupled with low borrowing cost and innovative financing packages. Although interest rate is expected to rise gradually from here on, we expect the overall property market recovery to continue into 2010.
The occupancy rate for the office sector decreased to 82% in 2009 due to the large supply of office space and weak business sentiment. The large supply of office space expected to come on stream in 2010 and 2011 will put further downward pressure on prices and rentals. Nevertheless, office development with good surrounding amenities and accessibility is expected to sustain reasonable investment returns.
The retail market fared positively in the second half of 2009, consistent with improved consumer sentiment. Occupancy stood well at approximately 86%, and is expected to continue into 2010 in line with the economic recovery. Despite the large supply of retail space in the market, the longer term outlook for retail is good with well-positioned retail centres in prime locations continuing to perform well.
Bandar Bukit Tinggi I, II and Parklands
Demand from owner-occupiers for our properties in our three townships remained stable in 2009, registering sales totalling RM134 million. This demand stability is due to Klang Valley’s favorable demographics and the facilities and amenities these townships offer, anchored by the presence of AEON Bukit Tinggi Shopping Centre.
BBT office towers saw the entry of foreign shipping and logistic companies and financial institutions. The opening of the business class hotel in the second half of 2010 will create synergy with the office towers and the retail boulevard, complementing the township’s existing amenities.
The group is carefully planning development of the remaining commercial land in Bandar Bukit Tinggi I and II to complement the existing commercial activities and further boost the vibrancy of this township.
Residential development is currently focused in Bandar Parklands, which experienced strong demand. The completion of the lushly landscaped 12-acre People’s Park in Bandar Parklands creates a gathering place for the residents to enjoy the sights and sounds of nature. The exclusive higher end gated residential properties in this township are expected to be launched later part of this year.
d’Banyan Residency @ Sutera
The exclusive homes at d’Banyan Residency, with the sea, golf course and mountains forming a scenic backdrop of Kota Kinabalu, Sabah continue to receive good response. Innovative financing packages with attractive incentives are offered to both local and foreign buyers. Sales and confirmed bookings registered to date, amounting to approximately RM120 million, is expected to increase further as the construction reaches an advanced stage.
BBT One Towers, the Boulevard and Business Class Hotel
The Group aims to transform the larger Bukit Tinggi township into a more lively community with a good mix of social and commercial activities. Quality amenities with modern designs have been built to cater to the changing lifestyles and expectations.
The landscape of the southern part of Klang city took on a new look with the completion of the BBT One Towers and the Boulevard. BBT One Towers will provide especially shipping companies, financial institutions and government agencies, with a modern corporate office environment complete with security and a spacious entrance lobby. The low-rise retail Boulevard is in response to the increasing popularity of al fresco casual dining and street mall shopping.
The business class hotel we are developing in Bandar Bukit Tinggi is nearing full completion, and will have 250 rooms and a ballroom with a seating capacity for 1,000 people, offering residents in this part of the Klang Valley a comfortable and convenient banquet venue. Guests of the hotel will also enjoy facilities such as the business centre, the lobby lounge cum café, meeting and seminar rooms, swimming pool, gym and ample car parks.
The Paradigm @ Petaling Jaya
The Paradigm is an integrated mixed development sitting on 12.4 acres along the LDP Expressway in Kelana Jaya, Petaling Jaya. When completed, it will have a shopping mall, proposed three blocks of Grade A prime offices and a basement car park. Piling works have been completed and currently basement works and construction of the mall are in progress.
Marketing activities to secure prospective tenants is actively in progress as the Paradigm Mall is expected to be opened for operation in November 2011. The response has been very encouraging and we are confident the Paradigm Mall will be a success.
1 Medini Residences @ Medini, Iskandar Malaysia
On 28 October 2009, WCT signed a joint venture agreement with Iskandar Investment Berhad, a unit of Khazanah Nasional Berhad, to develop a 10.96-acre land designated for high-rise condominium development in Medini, Iskandar Malaysia. Iskandar Malaysia is the country’s single largest urban development to-date, covering approximately 550,000 acres in Southern Johor. Medini, spanning over 2,000 acres of land, will be developed into an integrated lifestyle, leisure, cultural and financial district of Iskandar Malaysia.
This 1 Medini Residences, with Gross Development Value of RM600 million, is the first residential development in Medini, Iskandar Malaysia and comprises 1,341 residential units. It is planned to commence by the second half of 2010 and will provide quality housing accommodation to meet the needs of the students, staffs and executives working in the catalytic developments within Medini such as the Newcastle University, Legoland, Malborough College, Pinewood Studios and Raffles University.
Platinum Plaza, Ho Chi Minh City, Vietnam
Last year, Vietnam’s property market was affected by the world financial and economic turmoil. Property price, particularly for high-end products, fell in the second half of 2009. For 2010, it is expected to consolidate further with sustainable demand for medium cost housing, Grade A offices and modern shopping malls.
The Group’s 67% subsidiary, BSC-WCT Company Limited, holds the Investment Certificate for the Platinum Plaza which was awarded by the People’s Committee of Ho Chi Minh City in January 2008. It sits on 22.2 acres of land located in the District of Binh Chanh in Ho Chi Minh City. It fronts the Nguyen Van Linh Road, a brand new 10 lane East West Highway, which allows direct access to the north and south via the existing Highway 1A.
The proposed development comprises a shopping mall, 2 office towers, a 4-star hotel, a SOHO block and car park. The total gross floor area is about 671,960 square metres or 7.2 million square feet. The shopping mall is expected to be the largest in Vietnam when completed. The project will be developed in 3 phases over a 4-year period after the land has been resettled.
The design of the shopping mall under Phase 1 is ongoing while land compensation and resettlement were the main activities in 2009. WCT Engineering Vietnam Company Limited, a wholly-owned subsidiary, will be fully involved in the construction of Platinum Plaza when the land is fully resettled and compensated.
PROPERTY INVESTMENT AND MANAGEMENT
The Group’s first investment property, Bukit Tinggi Shopping Mall with a net lettable area of 1.0 million sq ft and 5,000 car parks, opened on 24 November 2007. The shopping mall is leased to AEON Jusco for an initial term of 10 years with an option to renew the lease for another 3 terms of 5 years each. The lease rental is reviewable every 3 years. It provides a steady recurring income base to the Group’s financials.
The shopping mall and the car parks at The Paradigm@ Petaling Jaya are under construction and expected to be completed by 2011. Adding to that, the business hotel within the Bukit Tinggi township is expected to start generating income from 2011. In Ho Chi Minh City, Vietnam, the Group has also planned to retain part of the office and the shopping mall at the Platinum Plaza mixed-commercial development in growing the Group’s property investment and management business.
HIGHWAY CONCESSIONS
The Group’s investments in Highway Concessions date back to 1999 when WCT, via a consortium of Malaysian contractors, ventured into India and constructed the 145km Tada to Nellore highway under the BOT scheme. Tolling commenced in 2004 and the increase in traffic volume and revenue is very encouraging. Our investments in 2 other BOT highway projects, the Durgapur Expressway and the Panagarh-Palsit Expressway - were open to traffic in 2005. The concession company is paid on a semi-annuity scheme by the National Highways Authority of India.
MOVING FORWARD STRATEGIES
In 2010, the global economy is expected to perform better. Nevertheless, the Group will continue to adopt strict financial discipline and conservative approach in doing business. We will continue to be selective about the type of work we accept and concentrate on projects that fit our profile and strengths. Although business environment is improving, we are committed to exercise prudent cost and cash flow management.
The Group will continue to explore opportunities in the global market to improve our operational and financial performance. We will build on our strengths by growing our core businesses with market focus in Malaysia, Vietnam and the Gulf States. In achieving this, we are determined to replenish the order book with carefully selected construction projects. The Group’s land acquisition will continue to be focused in growth corridors and designated economic zones with good infrastructure and amenities. Developments will concentrate on properties in the middle and up-market range with a good mix of residential and commercial content.
My team and I look forward to a successful 2010 and beyond.
Taing Kim Hwa
Managing Director
30 March 2010