MIDF: Govt to save and benefit from toll takeover

MoF says it will be raising the total RM6.2b cost via designated SPV company


THE government’s takeover of toll highways can help reduce compensation to the concessionaires, especially with the freezing of toll-rate hike.

MIDF Amanah Investment Bank Bhd analyst Adam Muhammad Rahim said through the acquisition, the government would get to manage toll rates without negotiating with concession and bond holders.

He said highway project costs are financed through the bond market and any changes to the concession’s structure would need bond holders’ approval, therefore it is easier if the concessions were under the government.

On the concern over the government’s debt following the takeover, the research house believed that savings from not having to pay compensation outweigh the overall cost of the corporate exercise.

“In short, the takeover value is high, but the amount of compensation that needs to be paid until the concessions end is probably higher,” Adam said.

The government can expect to save a total of RM 5.3 billion.

Last month, the government made a RM6.2 billion offer to acquire four toll highways — Konsortium Expressway Shah Alam (Kesas), Damansara-Puchong Expressway (LDP), Sistem Penyuraian Trafik KL Barat (Sprint) and Stormwater Management and Road Tunnel (SMART).

The Ministry of Finance (MoF) said it will be raising the total RM6.2 billion cost via designated special-purpose vehicle (SPV) company.

The offer values Kesas at RM1.3 billion, while SMART, Sprint and LDP are worth at RM369 million, RM1.98 billion

and RM2.47 billion respectively. “Commuters using these four highways will save as much as RM180 million per annum, and these savings will go straight into the disposable income of Malaysian households,” the ministry said in a press release.


The highway toll concessionaire’s shares rose by 17% or 74 sen after the announcement made by its board to vote in favour of the government’s offer.

Lingkaran Trans Kota Holdings Bhd (Litrak), valued at RM2.61 billion owns LDP and 50% of Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd, which owns Sprint, Kerinchi Link and Penchala Link expressways.

The group recently reported its fourth quarter (4Q) revenue ended March 31, 2019, fell to RM126 million from RM131 million recorded in the previous corresponding quarter, mainly due to LDP’s lower traffic volume.

Statistics shown by the group in its annual report highlighted LDP’s traffic volume decline by five million users to 161 million users in 2018. Meanwhile, its Sprint highway’s traffic volume dropped by two million users last year.

However, with the latest developments, it is expected the group will improve its earnings and financial performance in the next quarter.

Litrak’s major shareholders include Gamuda Bhd, 43.6% and AmanahRaya Trustees Bhd, 17.5%, followed by the Employees’ Provident Fund, 5.8%.


Engineering, property and infrastructure company, Gamuda, shares increased by 1.07% following its board’s decision to agree with the toll highway takeover.

MIDF remains optimistic with the earnings prospect of the group, despite the challenge for Gamuda to sustain its growth and income.

“Based on our estimates, disposing of these assets (toll highways) will leave a vacuum to its long-term recurring income by approximately 25% to 30% on an annual basis. Upon successful completion of the takeover, we estimate that it will impact financial year 2020 earnings by approximately -12.8%,” said the research house.

The group’s outlook is expected to grow steadily as it has a total of RM10 billion orderbook and RM2.2 billion in unbilled sales.

Gamuda is currently trading at RM3.88 with a market capitalisation of RM9.58 billion. The shares reached a 52-week high of RM4.04 and 52-week low of RM2.

It owns a 44% stake in Litrak, 50% stake in Sprint, 70% stake in Kesas and 50% stake in SMART.