Estimates unchanged for Litrak after toll hike freeze
KUALA LUMPUR: Analysts kept their earnings estimates unchanged for Lingkaran Trans Kota Holdings Bhd (Litrak) in spite of the government’s move to freeze toll hike for 21 highways next year.
The government decided on December 12, 2018 to freeze all toll hikes covering all vehicle classes on 21 highways across the country that were scheduled for an increase in 2019.
This is an extension from the Budget 2019 announcement which planned to freeze the toll hike in 2019 for intra-city tolls only.
“With the latest announcements by the government and the initial statement during Budget 2019, we are certain that the government will continue bearing the 48 per cent difference on toll rates charged to highway users by LDP through 2019,” said MIDF Amanah Investment Bank Bhd (MIDF Research).
“As there will not be any change in toll rates, we believe that traffic volume will not be affected. Therefore we make no changes to our traffic volume for LDP.”
Recall that toll rates for the LDP highway were raised by 48 per cent beginning January 2016 which marks the third and final hike according to Litrak’s concession agreement with the government.
However, as the rates payable by highway users were only recently raised by 31 per cent from RM1.60 to RM2.10 in October 2015, the scheduled hike in January 2016 was not passed on to highway users but instead compensated by the government.
Meanwhile, SPRINT experienced an average 72 per cent or RM1 increase for its three tolls rates in October 2015.
As per Litrak’s Annual Report, the Penchala toll plaza is scheduled for a toll rate hike in 2019.
The scheduled hike for the Penchala toll will be above 60 per cent (from RM3 to RM5) while the average 2019 toll rate hike of SPRINT’s three tolls is 69 per cent according to the Ministry of Finance, which is broadly in line with with MIDF Research’s earlier estimates.
“Following the freeze in toll rate hike, compensation payments by the government to the SPRINT would increase. We estimate the overall compensation payments to Litrak is set to increase to above RM170 million in FY19 and FY20 while earnings contribution from the concessionaires will remain unchanged.
“With the freeze extended to more highways around the country, we do not discount the possibility of indirect traffic spillovers especially from non-intracity tolls to SPRINT and LDP, sustaining growth in tollable traffic.”
Aside from that, the government’s move to return to the weekly float for RON 95 petrol price effective January 2018 to allow consumers to benefit from the current weakness in crude oil prices. However, the government will cap the RON95 petrol price at a maximum of RM2.20 per litre should crude oil prices increase.
“Hence, such initiatives could surpress the shift of people opting to commute by public transport and thus, limiting the compression of traffic growth.
“As our current traffic volume and earnings forecasts have taken into account of the freeze of toll hikes on intra-city tolls in the country for 2019 as per the Budget 2019 announcement, we are maintaining our earnings estimates at this juncture.”