RM5.48bil drive for highways

Vincent Lau

KUALA LUMPUR: The government has revived the takeover of four expressway concessions in the Klang Valley but more may be on the cards as discussions are ongoing.

According to a filing by Gamuda Bhd with Bursa Malaysia, the government has made a bid for its highways that valued Kesas Holdings Bhd, Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd (Sprint), Lingkaran Trans Kota Holdings Bhd (Litrak) and Projek Smart Holdings Sdn Bhd (Smart highway) at an equity value of RM4.432bil. The highways are also valued at an enterprise value (EV) of RM5.48bil.

Gamuda has a 70% effective equity interest in Kesas, 51.6% in Sprint, 43.2% in Litrak and 50% in the Smart Highway, it said.

Gamuda said its share of equity value is RM898mil in Kesas, RM466mil in Sprint and RM969mil in Litrak and a nominal 50 sen in Smart Highway. The highways were also part of a proposed takeover by the Pakatan Harapan government three years ago.

Rakuten Trade head of equity sales Vincent Lau said the deal would be positive for Gamuda to unlock and monetise its highway assets, as well as for highway users.

“Gamuda has been winning many construction projects lately including from overseas. The sale of the highways will unlock the value of its assets and pave the way for the company to focus on its construction segment moving forward,” he told StarBiz.

Gamuda has an outstanding order book of RM10.4bil following the recent job wins from its international markets including Australia and Singapore.

“The news is not a surprise as there had been talks about the sale of Gamuda’s highway concessions to the government last year.

“It is also positive for highway users as the toll rates on the four highways will not be raised until the end of the concession period,” Lau added.

The takeover of the highways was made by Amanat Lebuhraya Rakyat Bhd (ALR), which according to the government, is a non-for-profit entity. The ALR chairman is Tan Sri Azlan Zainol.

Works Minister Datuk Seri Fadillah Yusof told a press conference that the government was also in discussions to take over several other highways in the country using the same methodology.

“I hope the other highway concessionaires can take a look at how we are doing this and consider it. There are several other highway concessionaires which we are discussing with and hopefully we will be able to finalise them as soon as possible,” he said.

He added that the ALR’s main task was to repay its debts and pursuant to that, the highway assets would be handed to the government.

“There will be no more toll hikes on these highways. The toll rates that are imposed will be in place until the end of the concession period,” he said. “Among the four highways – three would see their concession period extended while one will see its concession period shortened,” Fadillah said.

The concession of Smart Highway will likely be shortened.

“But this extension will not happen automatically and it is not an exclusive right by the concession companies. The ministry will monitor the actual traffic report and this will determine any concession period extension. Once the company is able to repay all of its outstanding debts, the highways will be transferred to the ownership of the government and this is an important aspect of this agreement,” he added.

He said with the privatisation offer, the government would be able to save an estimated RM4.3bil in the long run as it did not need to pay any further toll subsidies to the highway concessionaires.

In its statement to shareholders, Gamuda said that the takeover offer values Kesas at an EV of RM1.24bil, Sprint at RM1.808bil, Litrak at RM2.119bil and Smart Highway at RM313mil.

“The board Gamuda will make the appropriate announcement in due course after going through due process internally and with its respective subsidiary, associated companies and joint venture company,” it said.

With this takeover offer, Fadillah said the current shareholders of the highway assets including the Employees Provident Fund, the Retirement Fund Inc or KWAP and Lembaga Tabung Haji would receive their proceeds and returns from investments earlier than anticipated.

“The government will not pay any money for this latest transaction. It will also not be issuing any government guarantees to the ALR financing. It will also not be bearing any costs to maintain and operate the highways with the takeover,” he added.