SUBANG JAYA: PLUS Expressways Bhd has entered into conditional agreements with the UEM Group to acquire the entire interests in Expressway Lingkaran Tengah Sdn Bhd (Elite) and Linkedua (Malaysia) Bhd for RM866mil.
The move, said managing director Noorizah Abdul Hamid, was in line with the company's expansion plans and would make it an integrated toll expressway operator while becoming an early, active participant in the development of the Iskandar Development Region (IDR).
PLUS currently operates and maintains a tolled expressway network comprising the North-South Expressway, the New Klang Valley Expressway, a section of the Federal Highway Route 2 between Subang and Klang and the Seremban-Port Dickson Highway.
The deal will also streamline the management of the operations of six expressways, including Elite and Linkedua. UEM owns 40.2% of PLUS, both of which are owned by Khazanah Nasional Bhd.
Elite designed, built and currently operates and maintains the 63km North-South Expressway Central Link and the KL International Airport Expressway. The 36-year concession expires in May 2030.
Linkedua operates and maintains the 44km Malaysia-Singapore Second Crossing under a 45-year concession accord ending in December 2038.
For the past four years, PLUS had provided expressway operation services to both companies.
Noorizah told a press briefing yesterday that the purchase would be funded entirely with borrowings.
She said PLUS was acquiring Elite and Linkedua at a price derived from a discounted cashflow method of valuation using discount rates of 15.2% and 15.7% respectively, which was higher than PLUS' cost of equity at 9.3%.
The Linkedua acquisition is expected to result in a negative goodwill of RM70mil, translating into a one-off enhancement in PLUS' consolidated earnings per share of 1.4 sen on completion of the transaction.
PLUS expects the transaction to be concluded by year's end. By end-2008, the two expressways are expected to contribute 15% to PLUS' total turnover.
The acquisition will increase PLUS' total lane-kilometre length of expressway by 15.7%, in line with its key performance indicator (KPI) of growing its lane-kilometre expressway length by 30% by 2009.
Elite and Linkedua will contribute 573km as well as an aggregate revenue of RM234.9mil, based on the companies' audited accounts for the financial year ended Dec 31, 2006. (Elite's toll hike, which is stipulated at 10% every three years, as well as that of Linkedua, are due to be implemented on Jan 1, 2008.)
To achieve the 30% growth, Noorizah said PLUS was widening some of its expressway lanes, presumably to accommodate the anticipated increase in traffic flowing into and from IDR in the future, and in tandem with the projected rise in the economic activity in the area.
PLUS shareholders can also look forward to the company maintaining its dividend payout this year. “We're not about to change our KPIs,” she said.
However, PLUS will not deliver dividends that reflect the acquisition of the two companies “until their debts are dealt with.”
She also said the transactions were not likely to affect PLUS' rating, as its gearing, which would increase from one to 1.6, was still manageable.
PLUS : [Stock Watch] [News]