CEO Morning Brief

WCE Shareholders Give Nod for Disposal of 40% Stake in Radiant Pillar for RM494m

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Publish date: Tue, 21 Feb 2023, 09:06 AM
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TheEdge CEO Morning Brief
WCE shareholders give nod for disposal of 40% stake in Radiant Pillar for RM494m

KUALA LUMPUR (Feb 20): Shareholders of highway concessionaire WCE Holdings Bhd have approved the proposed disposal of its entire 40% equity interest in Radiant Pillar Sdn Bhd (RPSB) to IJM Properties Sdn Bhd, for RM494 million cash.

The extraordinary general meeting (EGM) for the related party transaction (RPT) was held virtually on Monday (Feb 20) afternoon. IJM Properties is an indirect wholly-owned unit of IJM Corp Bhd, who also owns 26.65% stake in WCE.

In a statement, WCE said bulk of proceeds will be used to fund its West Coast Expressway project (WCE project), which will enable the group to save on financing costs.

With the transaction, WCE will exit RPSB – the developer of the 1,879-acre Bandar Rimbayu township in Kuala Langat, Selangor – and become a pure-play expressway operator.

Meanwhile IJM Properties, which currently own 60% in RPSB, will wholly-own the company as IJM seeks to commensurate Bandar Rimbayu, first launched in 2013, as a flagship township development.

WCE said the sale will unlock the value of its investment in RPSB and give rise to a pro forma gain on disposal of approximately RM245.67 million.

Its chief executive officer Lyndon Alfred Felix noted that the disposal is also strategic in the sense that the group is monetising non-core assets to focus on the core business.

“On the project (WCE project) front, construction is currently at 82%, and we are scheduled to open another four sections in 2023. With the remaining 1% of land acquisition slated to be completed soon, we are firmly on track for full completion of the WCE project in CY2024,” said WCE chief executive officer Lyndon Alfred Felix in the statement.

Construction of the third longest highway in the peninsula began in 2014, with 20 exits from Banting, Selangor to Taiping Selatan, Perak.

Costing RM5.044 billion, the highway has 11 sections, of which four sections are complete as at end-2022, whereas the remaining seven sections had a completion rate between 55% and 99%, its official website showed.

The completed sections are Section 5 (New North Klang Straits Bypass – Bandar Bukit Raja Utara), Section 8 (Hutan Melintang – Teluk Intan), Section 9 (Kampung Lekir – Changkat Cermin) and Section 10 (Changkat Cermin – Beruas).

Traffic numbers on the four operational sections are also very encouraging, Lyndon revealed, adding that the group is “optimistic that there will be very good traffic growth” upon the project’s completion.

“Specifically, our data shows that traffic numbers hit a peak during Hari Raya in 2022, followed by a new peak during the Christmas holiday in the same year. Most recently, the Lunar New Year festive period saw traffic numbers surpass the previous two peaks and hit a new high.”

WCE has been in the red for the past 13 straight quarters since the second quarter ended Sept 30, 2019 (2QFY2020).

For the first half ended Sept 30, 2022 (1HFY2023), WCE’s net loss narrowed to RM55.42 million, from RM78.36 million a year ago, while its six-month revenue dropped to RM225.87 million, from RM235.54 million during the same period.

The improved bottom line was due to better contributions from toll concession and investment holdings, management services and other segments.

Its toll concession business’s loss before tax narrowed to RM69.84 million, from RM98.71 million, while the division handling investment holdings, management services and others posted a profit before tax of RM17.92 million, from RM4.41 million a year ago.

Meanwhile, the construction division's net loss widened to RM17.69 million in 1HFY2023, from RM372,000 a year ago.

As at end-September 2022, WCE had cash of RM1.67 million and deposits with banks of RM330.9 million, against total borrowings of RM3.93 billion.

Separately, IJM had cash of RM2.68 billion against RM5.29 billion in loans, bonds and borrowings as at end-September.

WCE's share price closed unchanged at 38 sen, valuing the group at RM1.14 billion. Since the beginning of this year, the stock has gained 26.7% from 30 sen.

IJM share price settled down two sen or 1.26% to RM1.57, giving it a market capitalisation of RM5.73 billion.

Source: TheEdge - 21 Feb 2023

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