IJM closes 6% down after WCE project deferred

PETALING JAYA: IJM Corporation Bhd’s share price closed 6% or 18 sen to RM2.81 yesterday after the government decided to defer the RM3.2bil West Coast Expressway project.

The shares of the infrastructure company saw 6.31 million shares traded. It fell as much as 8.7% or 26 sen to RM2.73 in early trade.

The Economic Planning Unit (EPU) said on Wednesday the WCE project was shelved since the consortium, led by Kumpulan Europlus Bhd (K.Euro), had not secured financing within the 15-month timeframe.

The 250-km WCE would link Taiping in Perak to Banting in Selangor. In mid-2007, the consortium signed a concession agreement to build and collect toll along the WCE highway over a 33-year period.

K. Euro has a 60% stake in the consortium while the Perak and Selangor state governments own 20% each.

IJM’s interest in the project is via its 25% stake in K. Euro and analysts said IJM was eyeing the construction works for the WCE.

AmResearch Sdn Bhd said it was not surprised by the latest development as financing for the project was one of the major issues, which affected the WCE project, especially amid the current liquidity crunch.

“Moreover, the Federal Government had mentioned that it would likely defer or scrap select infrastructure jobs in favour of higher-impact ones,” it said.

Affin Investment Research said it did not expect the project to be launched anytime soon given the current tight credit environment, uncertain economic outlook, and government review of non-essential projects.

“However, we also did not expect the government to open the project for re-tender, which would deny IJM Corprelated jobs worth at least RM1.5 bil…if and when the project is launched,” it said.

Affin Research said it was doubtful that another consortium would be able to secure funding at reasonable terms and change the economics significantly

Analysts said the key to the project was access to long-term financing and its viability, since the WCE would run through the coastal areas where traffic flow was much lower when compared with the North-South Expressway.

Other concerns were how many motorists would travel from Taiping to Kuala Lumpur using the WCE when there was already another alternative, which was the North-South Expressway.

Share price of K. Euro closed 1.5 sen to 23 sen.

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