Taiwan High Speed Rail shares extend losses on Pingtung extension plan

09/11/2019 05:58 PM
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Taipei, Sept. 11 (CNA) Shares in Taiwan High Speed Rail Corp. (THSRC), the sole high speed railway operator in the country, extended losses from the previous session early Wednesday amid worries over the company's bottom line, after the Cabinet announced Tuesday the high-speed rail line will be extended to Pingtung County, dealers said.

Despite the decision, details about the new route, including construction and fund allocation remain unclear, which prompted concerned investors to continue to dump the stock, they said.

Shares in THSRC fell 1.63 percent to close at NT$36.30 (US$1.16) with 21.75 million shares changing hands on the Taiwan Stock Exchange (TWSE), where the benchmark weighted stock ended up 0.34 percent at 10,790.35 points Wednesday.

Wednesday's trading volume even surpassed the 13.8 million shares traded on Tuesday, when the stock lost 2.64 percent after Premier Su Tseng-chang (蘇貞昌) said the high speed rail system will go beyond its current terminus of Zuoying Station in Kaohsiung to serve Pingtung.

According to the Ministry of Transportation and Communications (MOTC), the ministry previously conducted feasibility studies on two possible high-speed rail routes to Pingtung, with one beginning at the train depot in Kaohsiung's Yanchao District and the other at its Zuoying station, both involving an elevated railway.

The estimated cost of the routes was NT$56.1 billion and NT$55.4 billion, respectively.

The ministry also proposed another two new routes in July, both passing through Kaohsiung, with one going from Zuoying to Taiwan Railway Administration's (TRA) Pingtung Station via TRA Kaohsiung Station, and the other from Zuoying to Pingtung's Chaozhou Station via Kaohsiung International Airport, both underground routes.

The newer routes would cost much more with estimates of around NT$121.7 billion and over NT$150 billion, respectively, as they would be underground, the ministry said.

"With the exodus of population from Pingtung, there are doubts about when THSRC would turn a profit from such a massive investment in the service extension," Dayu International Securities Investment Consultant analyst Chang Chih-cheng said.

In the first half of this year, THSRC posted NT$4.2 billion in net profit or NT$0.75 per share, but the company's ratio of debt to assets was 84 percent as of the end of June.

Commenting on the financial concerns resulting from the service extension, THSRC said it was not clear whether the company or the government would provide the large budget needed for the investment and there is no assessment report as to when the investment will tilt toward a financial balance.

"The plan to extend the high speed rail service to Pingtung is largely a political consideration with the presidential and legislative elections scheduled for January 2020," Chang said. "Such non-economic uncertainty is the last thing the equity market wants so it was no surprise that investors continued to unload the stock today."

"The stock continued to underperform the broader market as the local main board gained with the bellwether electronics sector in focus," Chang said.

Transportation Minister Lin Chia-lung (林佳龍) said the ministry is scheduled to review the four possible extension routes at an upcoming meeting later this month.

Since the beginning of August, foreign institutional investors have stood on the sell side for THSRC during most trading sessions.

"After recent losses, the stock could find its nearest technical support at around NT$36.00," Chang said.

THSRC was listed on the local main board Oct. 27, 2016 with an issue price of NT$15. Since June 2017, the stock has been added to the FTSE TWSE Taiwan 50 Index.

(By Wei Shu and Frances Huang)


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