MARC has upgraded its corporate debt ratings of WCT Engineering Berhad (WCT) and WCT Land Berhad (WCTL). The following ratings are affected: (1) WCT’s rating on its RM100 million Islamic Fixed Rate Serial Bonds has been upgraded to AA- ID from A+ ID, and its ratings on its RM100 million Islamic Commercial Papers / Medium Term Notes Programme have been upgraded to AA- ID/MARC-1 ID from A+ ID/MARC-1 ID, and (2) WCTL’s rating on its RM132 million Convertible Redeemable Debt Securities has been upgraded to AA- (cg) from A+ (cg). The rating outlook is stable. The rating upgrades reflect sustained strong revenue and earnings performance, supported by its excellent construction and operational track record in the Middle East. WCT’s outstanding order book, estimated at RM5.8 billion, provides strong earnings visibility. The continuing positive earnings momentum is reflected in its financial performance for the first nine months of 2007. Meanwhile, its capitalisation was boosted by the issuance of preference shares.

WCT is principally involved in civil engineering and construction works with projects in Malaysia, Bahrain, Qatar, Abu Dhabi and Dubai. WCT Group is also involved in property development and property investment through its 64.83% owned subsidiary, WCTL. WCTL’s flagship development is Bandar Bukit Tinggi in Klang.

WCT has evolved into a top tier construction player by capitalizing on its credible track record in domestic construction sector and its successful completion of the Sepang F1 Circuit project. WCT has completed two F1 circuits and is currently involved in the construction of its third F1 circuit, the Abu Dhabi F1 Circuit. The Group’s market presence in the Middle East has grown following the completion of its Bahrain F1 Circuit project. At present, WCT is participating in various mega projects in Bahrain, Qatar, Abu Dhabi and Dubai. WCT’s ‘hands-on’ approach to project management, the secondment of its experienced staff to various overseas projects, and its practice of identifying strong foreign partners have been key to controlling risks in overseas projects. Nevertheless, the rising raw material prices and higher execution risk associated with mega projects remain key challenges for WCT.

WCT recorded strong unaudited results for the first nine months of 2007 with a doubling in both revenue and profit before tax as compared to the previous corresponding period. The solid performance was mainly attributed to a significant increase in construction activity, particularly in the Middle East. WCT recent and pending corporate exercises, involving the issuance of preference shares, debt securities and privatization of its property development arm, WCT Land Berhad (WCTL), are expected to enlarge its shareholders’ equity to RM1.4 billion. In the medium term, cost savings are anticipated as a result of work force and resource rationalization stemming from the privatization exercise.

The stable outlook reflects expectations that WCT will maintain a strong business and financial profile consistent with the ratings. Ratings stability will also depend on WCT’s ability to maintain a moderate capital structure and good financial flexibility.