Toll road operators fall on worries about revamp

LDP

KUALA LUMPUR: Share prices of toll road operators fell on Friday on investors worries about a revamp in the toll structure by the new Federal Government.

At 11.11am, the FBM KLCI was up 5.43 points or 0.29% to 1,859.87. Turnover was 1.02 billion shares valued at RM787mil. There were 298 gainers, 426 losers and 308 counters unchanged.

However, Litrak fell 38 sen to RM4.76, Gamuda 12 sen to RM4.21 and IJM five sen lower to RM2 and Ekovest 3.5 sen to 65.5 sen. 

Pakatan Harapan promised to abolish toll collection in its 14th general election manifesto. An announcement is expected next week.

Currently, the nine listed toll concessionaires in Malaysia are IJM Corp Bhd, WCE Holdings Bhd, Taliworks Corp Bhd, Ahmad Zaki Resources Bhd, Gamuda Bhd, Bina Puri Holdings Bhd, Ekovest Bhd, Lingkaran Trans Kota Holdings Bhd (Litrak) and Malaysian Resources Corp Bhd (MRCB).

StarBiz reported that changes to toll charges on expressways would impact concessionaires and the national finances.

While it remains unclear whether the new administration plans to remove toll charges entirely, ending tolls in stages or to pursue a toll rate restructuring will have some impact on concessionaires, bond holders and the government’s own purse strings.

However, a complete abolition will likely see the federal government undertake significant burden on its fiscal spending.

UOB Kay Hian Malaysia Research said on Friday the markets are clearly ignoring Prime Minister’s Tun Dr Mahathir Mohamad’s declaration that the new administration would continue to be friendly to the capital market, as the key issue is the government facing major fiscal challenges by swiftly implementing its socialistic agenda. 

“We understand that excluding the north-south highway, there is roughly RM25bil worth of toll highway bonds outstanding,” it said.

The research house said while values have emerged with the sell-off of most construction stocks since GE14, especially for MRCB which now trades well below its book value (and trading at below 0.6 times net tangible asset), stocks are likely to be sidelined until the government reveals its plans. 

“Within our coverage, four construction companies have substantial exposure to toll road concessions, with Ekovest having the highest exposure.

“Of these, MRCB may even benefit from an expropriation situation (it has stopped tolling for the Eastern Dispersal Link since the previous government suspended toll charges for some tolls in Budget 2018), given that EDL is loss-making and assuming that the government would at least repay EDL lenders,” it said.