Highway sale proceeds to fund WCT capex, property ops

KUALA LUMPUR (June 8): WCT Bhd will utilise the estimated RM40 million proceeds from the proposed sale of its 21.6% stake in India-based highway concessionaire Swarna Tollway Pte Ltd (STPL) to finance its capital expenditure and property business expansion.

WCT corporate affairs manager Kenny Wong said the planned transaction with local rival IJM Corp Bhd, announced more than a year ago, is still on-going and is due for completion in the near term.

"We plan to buy machinery with the sale proceeds," Wong told The Edge Financial Daily over telephone on Thursday. "We are selling the concession because IJM is consolidating its highway assets," he added.

IJM had in October 2010 offered US$12.96 million (about RM40 million) for WCT's interest in STPL. This comprises WCT's 17% stake in STPL's ordinary share capital, and 22.45% of the highway concessionaire's preference share capital, according to the filing with Bursa Malaysia.

STPL holds a 30-year concession for the Swarna Tollway Project in Andhra Pradesh. Concession for the highway, which was completed in 2004, expires in September 2031.

STPL collects toll payments at two stretches of the National Highway there, namely, the Tada-Nellore and Nandigama-Ibrahimpatnam portions. Upon completion of the sale, WCT will have three existing concessions of which two are in India and the third in Malaysia.

The builder co-owns two other highway concessions in India on a build-operate-transfer (BOT) basis. These are the RM258 million Durgapur Expressway and RM219 million Panagarh-Palsit Expressway undertaken in collobaration with Gamuda Bhd in West Bengal, India.

Both highway concessions in India expire in 2020, according to Wong. In Malaysia, WCT secured its first concession in 2010 when it clinched from Malaysia Airports Holdings Bhd a RM486 million project to build and maintain an integrated complex within the new low-cost carrier terminal in Sepang.

"WCT's focus is on Malaysian concessions," Wong said, when asked whether the company intends to acquire more recurring income assets abroad.

He said concession is an added value proposition for the company's construction business, of which contribution is expected to be reduced in the coming years. This is because WCT is growing its real estate and hotel operations to reduce dependence on its construction income.

"We hope to acquire concessions which involve construction projects," Wong said.

The builder is bidding for up to RM3 billion worth of highway construction projects in Oman. However, it is unclear whether WCT is entitled to collect toll payments if it secures the projects involving two proposed highways.

Analysts said while the tender decision has been postponed, financial closure might come soon.

WCT has an existing construction order book of about RM2.4 billion while the value of its tenders come to RM5 billion. These tenders also include the construction of a 400-bed hospital in Sabah for some RM900 million under BOT and public-private partnership terms.

This story appeared in The Edge Financial Daily on June 8, 2012.