Kenanga: Privatisation move will allow Gamuda to unlock value

KUALA LUMPUR: Analysts are positive on the government’s proposed takeover of tolled highways under Gamuda Bhd.

They said the announcement by the Prime Minister’s Office had sent a clear message to investors regarding the government’s highway privatisation plan.

“We are positive with the news on the privatisation of the four tolled highways as well as the great improvement in the communication channel being an official announcement from PMO, which sends a clear and concise message to investors on the privatisation,” Kenanga Investment Bank Bhd (Kenanga IB) said yesterday.

The PMO on Saturday announced the proposed acquisition of four highway concessions that Gamuda has a majority stake in.

They are Lebuhraya Damansara Puchong (LDP), Western Kuala Lumpur Traffic Dispersal System (SPRINT), Shah Alam Expressway (Kesas) and SMART Tunnel.

Gamuda, in a brief Bursa filing yesterday, confirmed that it was in talks with the government over the takeover.

“As the board of directors of Gamuda has a fiduciary duty to deliver fair and reasonable value to all its shareholders, Gamuda has to ensure that the proposed transaction will be based on market valuation norms and practices.

“Gamuda will make the necessary announcement once there is a material development in relation to the above matter,” it added.

Kenanga IB has set a conservative acquisition price of RM2.8 billion for the sale of the four highways as it did not factor in the potential extension for Kesas, which is slated to end in 2023.

“We laud the government for their efforts in trying to ease the people’s burden, and the potential privatisation move will allow Gamuda to unlock the value in these four concessions and focus on growing its construction and property development businesses,” the firm said.

Public Investment Bank Bhd (Publicinvest) and Maybank Investment Bank Bhd (Maybank IB), meanwhile, are both wary of the development.

“While the timing of this proposed acquisition comes as a surprise given the government’s reported financial constraints, we believe Gamuda will get fair pricing and/or compensation by other means,” Publicinvest said.

Maybank IB Research sees the the proposed disposal of Gamuda’s four highways as “a major earnings negative”.

This is given the potential loss of a stable recurring income from the highway concessions could cap near-term sentiment and change Gamuda’s risk profile as a result of exposure to two cyclical businesses.