AFTER Gamuda Bhd and Lingkaran Trans Kota Holdings Bhd (Litrak) announced a proposal that would see the companies monetise their investments in four highways in the city, the spotlight is now on other concessionaires.

Heading the list is IJM Corp Bhd, which has two highways operating in the Klang Valley and another that links Semenyih to Seremban (Lekas Highway). The two city highways are the New Pantai Expressway (NPE) and Sungai Besi Highway (Besraya), both mature infrastructure with high traffic volumes.

In 2019, boutique financial adviser Newfields Advisory had worked on a proposal that would see the highways of both IJM and Gamuda being merged into a single entity, which would then issue bonds to pay for the assets. The proposal was to allow both concession owners to realise their investments in the highways and relieve their books of debt.

However, the deal did not take off.

Gamuda went ahead with its own restructuring of the highways, but it fell through due to the collapse of the Pakatan Harapan government.

An industry source says: “The latest proposal is a template for other city highway concessionaires to monetise their assets. IJM and possibly Permodalan Nasional Bhd (PNB) have a mixed stable of highways that are mature and some that are less profitable.

“Previously, there was no precedent. Now, there is a vehicle in Amanat Lebuhraya Rakyat Bhd (ALR), which is endorsed by the government.”

IJM’s infrastructure division has a total of eight highways and a port. In the financial year ended March 2021, the division recorded earnings before interest, tax, depreciation and amortisation (Ebitda) of RM408 million. In Malaysia, IJM has four highways, including the NPE and Besraya, while its other highways are in India and Argentina.

Traffic on Lekas Highway is low and the West Coast Expressway (WCE) from Banting in Selangor to Taiping in Perak is not fully completed yet.

“The revenue collection from NPE and Besraya should be more than enough to make up for any shortfall in Lekas,” says an analyst.

PNB’s six highways are concentrated in the Klang Valley; four are in operation and two are nearing completion.

The more mature highways are the Ampang-KL Elevated Highway (AKLEH) and Kajang Silk Highway. Two others — Guthrie Corridor and Lebuhraya Kemuning-Shah Alam — were built to cater for property development projects along their routes, whereby traffic will grow with the opening of more townships.

Ekovest Bhd also has highways within the city. The first two phases of the Duta Ulu-Kelang Expressway (Duke 1 and Duke 2) are seeing healthy traffic growth while Duke 3 (now known as Setiawangsa-Pantai Expressway) is only partially open.

There are several other concessionaires with highways in the Klang Valley.

Monetisation of the highways will ultimately depend, however, on the predictability of traffic flow and the price that the concessionaire is prepared to accept to exit the investment.

Little is known about ALR except that it is mandated to take over the highway concessions under Gamuda and Litrak.

Questions abound as to how the company obtained the government’s endorsement and what will happen if any of its five shareholders — Tan Sri Azlan Mohd Zainol, Datuk Idrose Mohamed, Datuk Soam Heng Choon, Datuk Dr Nirmala Menon and Datuk Mohamed Sharil  Tarmizi — decide to dispose of his or her stake. Also, what are the contingency plans if the take-up rate of the RM5.5 billion in bonds comes in below expectations?

“Five individuals [equally] own ALR. What happens if one of them decides to sell his or her stake? Surely, many are wondering who would take over and whether the promise to discontinue toll [collection] would be carried out when the bonds are redeemed,” says an investment banker.

Each board member of ALR has his or her own set of expertise. Chairman Azlan is an influential figure in the banking industry and was chairman of RHB Bank Bhd. He was CEO of the Employees Provident Fund between 2001 and 2013. Idrose was group managing director and CEO of PLUS Expressways Bhd, Pos Malaysia Bhd and Prasarana Malaysia Bhd. Soam was CEO of IJM and is currently president of Malaysia’s Real Estate and Housing Developers’ Association.

Nirmala was president and CEO of ING Malaysia Bhd, making her the first woman CEO in the life insurance industry in Malaysia, and is currently an independent director of Bank Negara Malaysia. Sharil  was chairman and CEO of the Malaysian Communications and Multimedia Commission. He is currently a director at Digital Nasional Bhd, the national single wholesale network provider of 5G in the country.

As the government gave ALR the mandate and concession extension for the highways, it is learnt that any changes in shareholders would need the consent of the bond holders and government as well.

In a statement on Friday, ALR affirmed that the five directors were independent of both the government and shareholders of the highway concessionaires. “We are not representatives nor nominees of any parties nor have any political affiliations,” it stated.