TOLL OPERATORS’ SHARES FALL
Gamuda dips 6pc, IJM and MMC also fall in knee-jerk reaction to proposal
SHARES of Malaysian highway concessionaires slid yesterday after the government intensified efforts to honour its election promise to abolish toll collections.
Gamuda Bhd, which is in talks with the government on the takover of four highways, fell by almost six per cent, or 18 sen, to RM2.86 at the close yesterday.
Gamuda and its 43.58 per centowned Linkaran Trans Kota Holdings Bhd (Litrak) were among the top losers on Bursa Malaysia yesterday. Litrak, which slipped 9.35 per cent to RM4.17, was the second top loser.
The fall came despite the fact that Gamuda could expect a big payout of at least RM2.8 billion from the government.
The Prime Minister’s Office (PMO) on Saturday announced that the proposed acquisition of Lebuhraya Damansara Puchong (LDP), Sistem Penyuraian Trafik KL Barat (Sprint), Lebuhraya Shah Alam (Kesas) and Smart Tunnel from Gamuda.
Gamuda owns 70 per cent of Kesas, 50 per cent of Smart Tunnel and a 30 per cent stake each in Sprint and LDP.
Other highway operators such as IJM Corp Bhd and MMC Corp Bhd also dropped in a knee-jerk reaction to the proposed deal.
IJM, owner of the New Pantai Expressway, went down 0.56 per cent, or one sen, to RM1.79, while MMC eased 2.91 per cent or three sen to RM1.
Ekovest Bhd and Taliworks Bhd also felt the effect, slipping 5.83 per cent to 56.5 sen and 3.93 per cent to 85.5 sen.
Analysts said the PMO had said talks with Gamuda was the first step taken to abolish tolls over a period of time.
This gives a signal that other concessionaires may come to the negotiating table sooner or later.
There are reportedly 29 tolled highways nationwide. The total cost of taking over all the toll concessions is estimated to be RM130 billion to RM145 billion, including some RM52 billion in debts.
The total annual cost of maintaining these tolled roads is RM1.5 billion to RM2.5 billion.
Kenanga Investment Bank Bhd has set a conservative acquisition price of RM2.8 billion for the sale of Gamuda’s four highways as it does not factor in the potential extension for Kesas, which is slated to end in 2023.
“The potential privatisation move would allow Gamuda to unlock the value in these four concessions and focus on growing its construction and property development businesses,” it said.
Public Investment Bank Bhd (PublicInvest) is surprised with the proposed takeover, given the government’s financial constraint. It, however, believes Gamuda will get fair pricing or compensation by other means.
PublicInvest lowered its target price on Gamuda to RM2.75 from RM3.14 as it imputed a higher discount to its valuations, considering the loss of future earnings contribution from its concession segment, although the expected cash infusion into the group may come in handy.
Maybank Investment Bank Bhd sees Gamuda’s proposed disposals 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.