JM Corp main beneficiary of WCE project

by **Cals** Mon 06 Jan 2014, 14:39

Business & Markets 2013

Written by Levina Lim of theedgemalaysia.com

Monday, 06 January 2014 10:21

KUALA LUMPUR: IJM Corp Bhd is expected to be the main beneficiary of the RM5.94 billion West Coast Expressway, on which construction is expected to start in the second quarter after 17 years of delay.

Analysts said apart from being the front runner for the construction work of the highway, which will be tendered over the next two to three months, IJM benefits by virtue of being a major shareholder of the WCE project.

“IJM Corp has the advantage and is likely to get a huge chunk of the project … more than half the project value would probably go to IJM — likely about RM4 billion,” a construction analyst told The Edge Financial Daily.

IJM’s effective interest in the highway is 40% via its 25.11% associate Kumpulan Europlus Bhd (KEuro), which owns 80% of West Coast Expressway Sdn Bhd (WCE), and through its wholly-owned unit, Road Builder (M) Holdings Bhd’s direct 20% stake in the concessionaire.

“IJM is most likely to get the tenders by virtue of the simple fact that it is a shareholder of KEuro,” said another analyst.

The financially distressed KEuro was not able to kick off the WCE project, putting the project on hold for almost two decades.

KEuro, then controlled by Tan Sri Tan Ah Chye, would have lost the WCE project if IJM had not stepped in as a 25% shareholder in March 2006.

KEuro is now on firmer financial footing with MWE Holdings Bhd emerging as a major shareholder after buying a 22.15% stake last July from Chan for RM155 million. MWE is now KEuro’s second largest shareholder with 24.68% equity interest.

With MWE and IJM as anchor shareholders, KEuro is aiming to raise some RM1.2 billion to finance the WCE project, with about half the amount from a rights issue.

“From the rights issue alone, we will have RM464 million, and if all warrants are taken up, we are looking at about RM700 million.This will be KEuro’s portion.

“And if there is any fundraising to be done later on, we will find other means deemed fit ... IJM will be injecting its portion of cash,” said chairman of KEuro Datuk Abdul Hamid Mustapha at the company’s extraordinary general meeting last Friday.

Meanwhile, IJM, via its subsidiary IJM Properties Sdn Bhd, continued to lend support to KEuro through the acquisition of a 10% equity interest in Radiant Pillar Sdn Bhd (RPSB) from KEuro for RM52.5 million, a move which was approved by KEuro’s shareholders in the EGM.

RPSB is the holding company of Bandar Rimbayu Sdn Bhd, a township development with about RM12 billion gross development value, for which the take-up rate had been “overwhelming”, according to KEuro.

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Abdul Hamid: IJM will be injecting its portion of cash.

“Henceforth, we expect to make money from Radiant Pillar, which is why we are only selling 10% to IJM — that will underpin our P&L [profit and loss statement] in the next 15 years,” said Abdul Hamid, adding that he expects Bandar Rimbayu to be the key contributor for the company’s revenue in 2014.

The RM52.5 million cash gained from the disposal of the 10% stake in RPSB will be used by KEuro to fund the construction of WCE, he said.

It would also result in IJM Corp increasing its stake in the Bandar Rimbayu township to 60% from the 50% it currently holds.

“I think there’s a good chance for us getting back into the black [this year].

“We are going to have a new chief executive officer and chief financial officer and they will likely steer the company to greater heights,” said Abdul Hamid, adding that top management changes are likely to occur this month.

This article first appeared in The Edge Financial Daily, on December 06, 2014.