WCE may be loss making but investors are keeping it within sight

WCE Holdings Bhd has been trending higher especially in the past 5 days, gaining some 8.4% to close at 84 sen on Sept 18. The counter has not been able to surpass its year high of RM1.19 in January this year, plunging to a low of 68 sen on Aug 5.

Sentiments on the operator of the West Coast Expressway have not been very positive as it continued to make losses. WCE recorded its fifth consecutive quarterly net loss, primarily due to interest expense incurred in relation to project financing for completed sections of the highway.

However, it managed to trim its net loss for its first financial quarter ended June 30, 2024 (1QFY2025) narrowed to RM25.86 million from RM26.41 million a year earlier. This is despite posting lower quarterly revenue, which fell 34.9% to RM75.57 million from RM116.04 million a year ago.

On a positive note, WCE is profitable at the operating level, with a 147% year-on-year jump in earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM18.1 million for 1QFY2025.

Its toll collection revenue during the quarter surged 93% y-o-y RM26.1 million boosted by higher traffic volume after the opening of the additional sections, namely Section 6 (Bandar Bukit Raja Utara–Assam Jawa) and Section 11 (Beruas–Taiping Selatan).

The WCE project involves the development of a 233km tolled highway from Banting, Selangor to Taiping, Perak. Six out of the highway's 11 sections have been opened for traffic.

The construction of Section 1 (Banting–South Klang Valley Expressway [SKVE]) and Section 2 (SKVE–Shah Alam Expressway or Kesas) has been completed and is currently at the inspection stage.

Meanwhile, the construction for the final three sections namely, Section 3 (Kesas–Federal Highway Route 2), Section 4 (Federal Highway Route 2–New North South Klang Straits Bypass) and Section 7 (Assam Jawa–Tanjung Karang) is currently ongoing.

Going forward, WCE Holding said the additional sectional toll revenue is expected to further improve the future financial performance of the group in terms of cash flows and operating results.

It expected to be return to the black once the entire alignment of WCE is fully operational, as revenue growth outpaces interest cost. In the meantime, the counter is unlikely to see a sustainable rise in share price as investors would prefer to take a safer route for its investments.