Business | Construction
WCT could lose $85m on cancelled project
WCT, whose $1.3 billion contract to build a Dubai racetrack was cancelled, may lose as much as 300 million ringgit on the project, more than analysts' estimated profit this year for the company.
- Bloomberg
- Published: 23:58 January 6, 2009
Kuala Lumpur: WCT, whose $1.3 billion contract to build a Dubai racetrack was cancelled, may lose as much as 300 million ringgit ($85 million) on the project, more than analysts' estimated profit this year for the company.
The Malaysian engineering firm is confident it can reclaim the money, which includes 178 million ringgit in advance payments and a so-called performance bond, an unidentified executive told investors yesterday.
WCT slumped 30 per cent yesterday on the Kuala Lumpur stock exchange, the steepest decline in almost 14 years, after Meydan terminated the contract for an alleged missed deadline.
WCT said its other projects in the Middle East, including a Formula One circuit, aren't in danger of cancellation.
"Regardless of who is at fault, we see this as posing a risk to WCT's reputation as its execution capability may be in question," Jeremy Goh, an analyst at OSK in Kuala Lumpur with a 'neutral' rating on WCT, said in a report.
"It would also hamper the group's ability to secure more jobs in the Middle East, on which it relies for projects."
Arabtec Holding, WCT's partner for the project, fell as much as 10 per cent in Dubai. WCT and Arabtec won the Dh4.6 billion order in September 2007.
The contract was cancelled because WCT "failed to abide by the time schedule for the completion," Meydan said in an e-mailed statement yesterday. The company took the "decision to reassert its resolve to complete the project on time."
Outstanding work on the Nad Al Sheba racetrack contract is valued at about 1.3 billion ringgit, the WCT executive said. The company, based in Shah Alam, outside Kuala Lumpur, has no plans to set aside funds for any loss on the contract, it said.
The contract was expected to account for 37 percent of WCT's profit this year, according to a report by JPMorgan Chase Analysts expect WCT to make 236 million ringgit in 2009, according to estimates compiled by Bloomberg.
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