Highway operators said to be mulling restructuring of concessions

TheEdge Tue, Jul 27, 2021 02:00pm - 2 years View Original


A number of highway concessionaires that have been adversely impacted by the Covid-19 pandemic and subsequent lockdowns are understood to be mulling a restructuring of their concession agreements.

In April, Works Minister Datuk Seri Fadillah Yusof said that the government was looking at a highway trust proposal by Gamuda Bhd, whereby the concession period would be extended without further tariff hikes.

Gamuda owns 44% of publicly traded Lingkaran Trans Kota Holdings Bhd or Litrak, 52% of Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (Sprint), 70% of Kesas Sdn Bhd and 50% of Projek SMART Holdings Sdn Bhd.

The minister had also said that Prolintas, a unit of Permodalan Nasional Bhd (PNB), had approached the government about a restructuring exercise but he did not give further details.

Prolintas operates the Ampang-Kuala Lumpur Elevated Highway; Prolintas Expressway Sdn Bhd, which manages the Guthrie Corridor Expressway; Projek Lintasan Shah Alam Sdn Bhd, which operates Lebuhraya Kemuning Shah Alam; Sistem Lingkaran Lebuhraya Kajang Sdn Bhd, which owns the Kajang Silk Highway; Projek Lintasan Sungai Besi-Ulu Klang Sdn Bhd, the highway of which is being constructed; and the controversial Projek Lintasan Damansara-Shah Alam Sdn Bhd, which is building the Damansara-Shah Alam Elevated Expressway.

Asked for further updates on the restructuring of highway concessionaires, Fadillah replied in a brief WhatsApp message, “No decision yet. Will let you know once a decision is made at Cabinet level.”

However, with the concessionaires’ operations understandably impacted and given the total of 29 toll roads, many of which have outstanding debt papers, there could be problems in the offing.

PLUS' traffic down

The largest toll road operator in the country is PLUS — 51% owned by UEM Group Bhd and 49% by the Employees Provident Fund (EPF). UEM Group is a wholly-owned unit of state-controlled investment arm Khazanah Nasional Bhd.

The five concessions under PLUS’ belt are Projek Lebuhraya Utara-Selatan Bhd, which has under its umbrella the North-South Expressway, New Klang Valley Expressway, Federal Highway Route 2 and Seremban-Port Dickson Highway (846km); Expressway Lingkaran Tengah Sdn Bhd, which includes the North-South Expressway Central Link (63km); Linkedua (M) Bhd, which owns the Malaysia-Singapore Second Crossing (47km); Konsortium Lebuh Raya Butterworth-Kulim Sdn Bhd or better known as the Butterworth-Kulim Expressway (17km); and Penang Bridge Sdn Bhd (13.5km).

All of PLUS’ concessions end in December 2038.

Circa 2017 to 2019, the government expressed its intention to sell PLUS as part of a plan to reduce toll charges and ease the financial burden of toll users. Five offers were received in what would have been the largest deal in corporate Malaysia's history as the takeover of PLUS was valued at more than RM30 billion.

However, the then Pakatan Harapan government made a U-turn on its earlier plans and opted instead to give an 18% discount on PLUS’ toll rates starting Feb 1, 2020, in order to keep the highway operator in the hands of the government and the EPF.

But amid the onslaught of Covid-19 and the many movement restrictions, the financial performance of PLUS and other highway operators have plummeted in line with lower traffic numbers.

“Luckily, we didn’t get PLUS … It used to generate [close to] RM12 million a day [in revenue] but it’s down to about RM3 million now. It (the government not selling PLUS) is truly a blessing in disguise for us,” says one of the previous bidders for PLUS. Checks on the Companies Commission of Malaysia reveal that PLUS has yet to file its financials for FY2020. However, its FY2019 revenue of RM4.27 billion works out to RM11.71 million a day. If daily takings have indeed fallen to RM3 million, it would mean that revenue has fallen by an alarming 75%.

A senior executive of a highway operator reckons that PLUS’ traffic could be down by as much as 60%. “PLUS is badly hit because of the interstate travel restrictions,” he observes.

An analyst from a rating agency, however, says PLUS’ traffic numbers for 2020 was only down by 30%. “So, I am assuming revenue would be down by 30% as well, which isn’t that bad,” he adds.

However, a regular user of PLUS who has been allowed to make trips up north during the movement restrictions contends that there are very few cars on the road, and puts the reduction in traffic at a minimum of 50%.

“I went to Taiping last month, there were hardly any cars on the road,” he remarks.

For FY2019, PLUS chalked up RM394.28 million in after-tax profit, from RM4.27 billion in revenue. It paid out RM443 million in dividends to its shareholders Khazanah and the EPF.

Lower revenues

Prolintas for its financial year ended 2019 made RM35.38 million in after-tax profit from RM362 million in revenue. Of note are two points — this was Prolintas’ first profit in five years and it paid out RM72 million in dividends to its parent PNB.

In the northern segment, PLUS’ alignment is similar to that of WCE Holdings Bhd, which is in the midst of completing the construction of its highway. WCE owns an 80% stake in West Coast Expressway Sdn Bhd, which operates the 233km highway from Banting in Selangor to Taiping in Perak. The West Coast Expressway is less than 70% built and questions have been asked about the viability of the highway following PLUS’ 18% discount in February last year. WCE’s largest shareholder is IJM Corp Bhd, which has a 25.99% stake in the toll road operator.

For the nine months ended March this year, WCE suffered a net loss of RM75.34 million from RM234.47 million in revenue. In the corresponding period a year ago, the company suffered a net loss of RM22.93 million from RM693.28 million in sales, so this indicates a 66% plunge in revenue.

Other than WCE, IJM Corp owns Besraya Sdn Bhd (better known as the Sungai Besi Highway), New Pantai Expressway Sdn Bhd or NPE, and Lebuhraya Kajang-Seremban Sdn Bhd or Lekas.

For the financial year ended March 2021, IJM’s infrastructure arm (which lumps together port operations and highways) generated profit before tax of RM117.07 million from RM751.03 million in revenue. In FY2019, prior to the pandemic, the unit made RM268.24 million in profit before tax from RM732.18 million in revenue.

Litrak for its financial year ended March 2021 registered net profits of RM205.78 million from RM392.83 million in revenue. The year before, it chalked up net profits of RM236.11 million from RM516.03 million in revenue.

With revenue on a downward spiral and debt commitments outstanding, toll concessionaires are in a tight spot.

 

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

GAMUDA 5.270
IJM 2.430
LITRAK 0.005
WCEHB 0.995

Comments

Login to comment.