ERL posts first full-year profit and revives IPO plans

  • Business
  • Tuesday, 20 Jan 2004

EXPRESS Rail Link Sdn Bhd (ERL), which runs trains from Kuala Lumpur to KL International Airport, has revived plans for an initial public offering (IPO) after posting its first full-year profit in 2003, executive chairman Datuk Mohd Nadzmi Mohd Salleh said. 

“It was profitable last year and we hope it can be profitable this year,” Nadzmi said in an interview in Kuala Lumpur, declining to provide earnings figures. “Flotation is of course in our mind. That’s how we want to bring this company forward.”  

In April, ERL scrapped plans for a 2003 IPO as the Severe Acute Respiratory Syndrome (SARS) outbreak and the US-led war against Iraq led tourists and businesspeople to avoid the region.  

Datuk Mohd Nadzmi

Travel has since rebounded; with Malaysia predicting a record number of tourists will visit the country this year. 

That should lift passenger revenue at ERL, which is 40%-owned by Lembaga Tabung Haji and half-owned by YTL Corp Bhd. The company plans to sell shares to help pay loans used for the construction of the RM2.4bil line, which started operating in June 2002. 

“With the decline of the ringgit I expect an influx of tourists to enjoy one of the more value-for-money destinations in the region,” said Azrul Azwar, an economist with MIDF Sisma in Kuala Lumpur. “With a strong jump in arrivals from last year, businesses such as transportation, hotels and restaurants should benefit.” 

The ringgit, which was pegged to the US currency in September 1998, has declined in tandem with the dollar over the past 12 months. In that time, the euro had risen 20% and the yen 11%. 

ERL owes RM940mil to Bank Pembangunan & Infrastruktur Malaysia Bhd. The Ministry of Finance earlier took over a Kreditanstalt fuer Wiederanfbrau loan extended under the German government’s export-guarantee scheme. 

The company spent last year reducing costs after the SARS outbreak, which killed 774 people around the world and cut ERL's daily passenger numbers by about a fifth to 4,000.  

The company renegotiated contracts on maintenance, the provision of spare parts and insurance, helping reduce costs by about 5%, Nadzmi said. 

The company also cut the size of its workforce by 15% to 110 people. The cost-reduction efforts helped increase the yield-per-passenger to about RM34.20, compared with RM29.70 at the start of the year. 

It now wants to increase the number of people using the service between Kuala Lumpur and the airport to a daily average of about 6,000. Currently, about 5,000 people make the 56km journey every day. 

ERL has signed an agreement with Malaysian Airline System Bhd for the national carrier to sell tickets to international visitors and increase the number of people using the train to get from the airport to Kuala Lumpur. 

The company, which has a 30-year contract to operate the service, uses eight electric trains built by Siemens AG, completing the journey between the city and the airport in 28 minutes. - Bloomberg  

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