KUALA LUMPUR: Toll concessionaires listed on Bursa Malaysia last Friday felt the brunt of investors concern over the new Pakatan Harapan (PH) government’s election promise to review or abolish highway tolls.
While the benchmark FBM KLCI closed 0.06 points higher at 1,854.50, most toll concessionaires saw their share prices drop on the prospect that their revenues and operations will be impacted by the proposed toll revision.
At the close, IJM Corp Bhd fell 9 sen to RM1.96; WCE Holdings Bhd fell 10.5 sen to settled at 78.5 sen; Taliworks Corp Bhd fell five sen to 95 sen; Ahmad Zaki Resources Bhd fell 1.5 sen to 3.85 sen; Gamuda Bhd fell 2.4 sen to RM4.09; Bina Puri Holdings fell 2.5 sen and settled at 33 sen; Ekovest Bhd fell 3.5 sen to 65.5 sen; Lingkaran Trans Kota Holdings Bd fell RM1.38 to RM3.76, while Malaysian Resources Corp Bhd rose two sen and settled at 70.5 sen.
It remains unclear whether the new administration plans to remove toll charges entirely, ending tolls in stages or to pursue a toll rate restructuring.
RAM Ratings said it expects bonds and sukuk issued by toll road concessionaires to be affected.
As at 15 May 2018, the sector comprised 23 issuers, with RM52.83 billion of bonds and sukuk (excluding loan stocks) outstanding (RM39.79 billion of which are rated).
The credit rating agency said these are largely held by local institutional investors and government-linked pension funds. In the interim, if tariffs are not implemented as per the toll-rate schedule in the concession agreements, the government is obligated to compensate concessionaires, as has happened in the past.
Previously, the government allocated a sum of RM448 million in Budget 2018 for compensation to toll concessionaires.
Pending further details, RAM said it believed the government will balance its plan against any implications to the bond market.
RAM co-head of infrastructure and utilities ratings Chong Van Nee said cashflow matching is a key rating driver for toll-road concessionaires.
“As concession terms are not uniform across the sector, the issue rating for each toll road would have to be assessed on a case-by-case basis, with an emphasis on the timing of and the eventual payment amount from the government, weighed against the financial obligations of the concessionaires,” she said.
Abolishing tolls will also have a significant burden on the federal government’s fiscal spending.
Chairman of Centre for Public Policy Studies, Tan Sri Dr Ramon V. Navaratnam said the public should be informed how much this initiative would cost and the implication it has on the country’s budget deficit and debt.
“Everybody likes a free ride. Nobody likes to pay taxes or tolls. Hence, the popular reaction will be very favourable. If the government does not cover the losses through additional taxes, then it has to cut back expenditure, which is not easy for the operating side,” he told NSTP Business yesterday.
Ramon said the government might need to reduce its operational and development expenditure, and it can use these savings to compensate the toll operators and cover the shortfall from removing goods and services tax (GST).
“Whether it is enough or not, we do not know. Otherwise, we might becoming a welfare state and this may not be good unless we know what are the figures,” he said.
Ramon said the public would want an explanation on where the financing is coming from.
“If the government does not reduce its workforce, then it must cut down development projects, which may not be good,” he said, adding that development expenditure includes building infrastructure projects like roads, bridges, schools and hospitals.
Ramon said if the government insisted to abolish GST and tolls, then it has to raise borrowings from domestic and foreign players.
That will have a strain on the debt position. When tolls and GST are abolished, somebody has to settle the bill or bear the cost, he said.