Toll Concessionaires - New North Klang Straits Bypass: any takers?

-  It has been reported in the local press that the New North Klang Straits Bypass (NNKSB) is now up for sale. 

-  This follows a recent newspaper advertisement by the highway’s liquidators, PricewaterhouseCoppers Advisory Services Sdn Bhd, which invited qualified investors to submit an expression of interest to acquire the assets and multi concession rights to the highway. 

-  The multi-lane dual carriageway NNKSB measures 17.5km. It serves to link North Port to Bukit Raja in Klang. 

-  The highway also runs parallel to the old North Klang Straits Bypass, with linkages to other major highways within the Klang Valley. They include the North Klang Valley Expressway (NKVE), Federal Highway, Elite Highway and Kesas Highway.

-  The NNKSB was supposed to have been completed in early 1998, but works were stalled due to protests from villagers affected by the economic downturn. The project’s initial cost of RM230mil had also escalated to ~RM570mil due to changes to its technical design (e.g. construction of a flyover at the Rantau Panjang village, earthworks at swampy areas along the highway). 

-  The NNKSB is being run by Lebuhraya Shapadu Sdn Bhd, which was given a 25-year concession from 1 August 1995 to collect toll on the highway. Toll collections started in May 2002.

-  We gather that Lebuhraya Shapadu could be in the process of being wound up. The directors of the company are brothers, Shafiz and Shazali Shahrani – who are also sons of the group’s late founder, Datuk Shahrani Abdullah. 

-  Lebuhraya Shapadu recorded losses after tax of RM57mil and RM60mil, respectively, against revenues of RM39mil and RM41mil.

-  We are unsure about the level of interest for NNKSB, particularly when the concession has about eight years left. Furthermore, any proposed extension of the concession period, if any, would be challenging given the government’s recent moves to either cap or reduce highway charges in the country.

-  Apart from NNKSB, several other highways appear to have been takeover targets in recent months following the privatisation of PLUS by the UEM-Khazanah Nasional JV earlier this year. They include EPMB’s proposed acquisition of Maju Expressways Bhd (MEX) and the reported interest by PLUS itself in Litrak Holdings and SILK Holdings.

-  We maintain our NEUTRAL stance on Malaysian toll concessionaires amid continued uncertainties on the restructuring of toll rates. For direct exposure to the toll industry, we prefer Litrak mainly for its stable cashflows and decent yields of 4%-5%.   

Source: AmeSecurities