OPERATORS SEE RED
SHARE prices of most toll concessionaires slipped yesterday amid concerns their revenues will be impacted by any toll revision. The Pakatan Harapan government, in its election campaign, had promised to review or abolish highway tolls.
TOLL concessionaires listed on Bursa Malaysia yesterday bore the brunt of investors’ concern over the Pakatan Harapan government’s election promise to review or abolish highway tolls.
While the benchmark FTSE Bursa Malaysia KLCI closed 0.06 points higher at 1,854.50 yesterday, most toll concessionaires saw their share prices drop on the prospect that their revenues and operations will be impacted by the proposed toll revision.
IJM Corp Bhd fell nine sen to RM1.96, WCE Holdings Bhd eased 10.5 sen to settle at 78.5 sen, Taliworks Corp Bhd dropped five sen to 95 sen, Ahmad Zaki Resources Bhd lost 1.5 sen to 3.85 sen, Gamuda Bhd decreased 2.4 sen to RM4.09, Bina Puri Holdings declined 2.5 sen to 33 sen, Ekovest Bhd fell 3.5 sen to 65.5 sen and Lingkaran Trans Kota Holdings Bhd was RM1.38 lower at RM3.76.
Meanwhile, Malaysian Resources Corp Bhd rose two sen to 70.5 sen.
It remains unclear whether the new administration plans to remove toll charges entirely, end tolls in stages or pursue a toll restructuring.
RAM Ratings said it expected bonds and sukuk issued by toll concessionaires to be affected.
As of Tuesday, the sector comprised 23 issuers, with RM52.83 billion worth of bonds and sukuk (excluding loan stocks) outstanding (RM39.79 billion of which are rated).
The credit rating agency said these were largely held by local institutional investors and government-linked pension funds.
In the interim, if tariffs are not implemented as per schedule in the concession agreements, the government is obligated to compensate concessionaires, as has happened in the past.
Previously, the government allocated RM448 million in the 2018 Budget for compensation to toll concessionaires.
Pending further details, RAM said it believed the government would balance its plan against any implications to the bond market.
RAM infrastructure and utilities ratings co-head Chong Van Nee said cash flow matching was a key rating driver for toll concessionaires.
“As concession terms are not uniform across the sector, the issue rating for each tolled road would have to be assessed on a case-by-case basis, with an emphasis on the timing of and the eventual payment amount from the government, weighed against the financial obligations of the concessionaires,” she said.
Abolishing tolls will also create a significant burden on the government’s fiscal spending.
Centre for Public Policy Studies chairman Tan Sri Dr Ramon V. Navaratnam said the public should be informed how much this initiative would cost and the implication it would have on the country’s budget deficit and debt.
“Everybody likes a free ride. Nobody likes to pay taxes or tolls. Hence, the popular reaction will be very favourable. If the government does not cover the losses through additional taxes, then it has to cut back on expenditure, which is not easy for the operating side,” he told NST Business yesterday.
Navaratnam said the government might need to reduce its operational and development expenditure, and use these savings to compensate toll operators and cover the shortfall from the removal of the Goods and Services Tax (GST).
“Whether it is enough or not, we do not know. Otherwise, we may become a welfare state and this may not be good unless we know what are the figures,” he added.
He said the public would want an explanation on where the financing was coming from.
“If the government does not reduce its workforce, then it must cut down development projects, which may not be good,” he said, adding that development expenditure included building infrastructure projects like roads, bridges, schools and hospitals.
Navaratnam said if the government insisted on abolishing GST and tolls, then it had to raise borrowings from domestic and foreign players.
That would be a strain on the debt position. When tolls and GST were abolished, somebody had to settle the bill or bear the cost, he added.