KUALA LUMPUR (Oct 14): Now that Gamuda Bhd’s highway concessions have been successfully restructured, all eyes are now on the other concessionaires, including IJM Corp Bhd.
The news of Gamuda’s successfully restructured highway concession on Thursday (Oct 13) came on the same day as an announcement by caretaker Prime Minister Datuk Seri Ismail Sabri Yaakob that the government has agreed with the proposal to restructure four highway toll concession companies under Prolintas to reduce the toll rates of the highways involved.
The PM said the reduction of toll rates involves the Ampang-Kuala Lumpur Elevated Highway (AKLEH), Guthrie Corridor Expressway (GCE), Lebuhraya Kemuning-Shah Alam (LKSA) and Kajang Dispersal Link Expressway (SILK), effective 12.01am on Oct 20.
Meanwhile, IJM-owned and operated Lebuhraya Kajang-Seremban (Lekas) and the Sungai Besi Expressway (Besraya) will also see toll rate reductions beginning Jan 1, 2023.
When contacted by theedgemarkets.com regarding the announcement by the PM, IJM said they have “no comment”. It is worth noting that IJM has yet to make any statement on Bursa following the announcement by the PM on the toll rate reduction of its highways.
Analysts are of the view that other concessionaires could likely be approached to restructure as well, in bids to freeze any potential toll rate hikes in the future.
Earlier this year, Senior Works Minister Datuk Seri Fadillah Yusof also indicated that more highway concessions are expected to go through a restructuring process.
Notably, other listed highway concessionaires include the likes of Ekovest Bhd, Taliworks Corp Bhd, Bina Puri Holdings Bhd and Ahmad Zaki Resources Bhd.
Notwithstanding that, analysts believe there will be more developments in terms of IJM with its concession restructuring, especially in the fourth quarter of this year (4Q22).
“While IJM is currently working with the government to restructure some of its toll highway concessions, we do not expect IJM to completely exit the concession business like Gamuda, as IJM still wants to retain a stake in the highway business and it is also leveraging on highway extension works as one of the opportunities to grow its construction order book.
“IJM has submitted proposals to the government on the highway restructuring and it is still awaiting a decision,” UOB analyst Noor Hazmy Noor Hazin told theedgemarkets.com on Friday (Oct 14).
Another analyst who spoke on condition of anonymity also concurred with Noor Hazmy.
“From what I understand, IJM will still be involved in the toll concession business and it has no intention of disposing of it. The restructuring to me will not have much of an effect on IJM because they would have accounted for the incremental toll rates in their negotiation with the government,” said the analyst.
Possibility of two phases to IJM restructuring plan
Meanwhile, Noor Hazmy said there might be two phases to the restructuring plan, with the first one to only include matured highways such as IJM’s 100%-owned Besraya Highway, 100%-owned New Pantai Expressway (NPE) and 50%-owned Lekas Highway.
This he noted is consistent with the PM’s latest statement, where he indicated that the toll reduction for Lekas and Besraya will potentially come into effect on Jan 1, 2023.
Noor Hazmy notes that traffic at NPE, Lekas and Besraya are now above pre-Covid-19 levels, bouncing back from the massive decline in traffic volume in FY21 due to nationwide lockdowns.
Given that the concession agreement requires the government to pay a compensation to IJM for the toll rate hikes freeze, rising traffic volume would mean that the toll subsidy bill will similarly rise and thereby putting further pressure on the government’s finances, Noor Hazmy said.
“As such, the restructuring plan for IJM’s toll highway concessions may need to take place soon, so that the government can reduce its toll subsidy bill and freeze toll rates,” he said.
The analyst thinks that the second phase may include IJM’s 38%-owned West Coast Expressway (WCE), which is currently still under construction (around 80% complete).
IJM’s share price finished one sen or 0.65% lower at RM1.53 on Friday, bringing it a market capitalisation of RM5.58 billion.