KUALA LUMPUR: A successful PLUS Malaysia Bhd takeover by a private company may have led to complications with regards to obtaining bondholders approval, Hong Leong Investment Bank Bhd said.
HLIB also said the government’s decision not to sell PLUS bodes well for UEM Edgenta Bhd as there had been concerns that its wholly-owned unit Edgenta PROPEL Bhd might lose its role as the maintenance contractor for the country’s largest highway network.
The firm said the shift of ownership would inevitably be blocked by PLUS bondholders due to heightened credit risks.
“As we understand, PLUS’ sukuk is currently rated by MARC as AAA (highest rating) in part we think due to its government ownership. In our view, a shift of ownership to the private sector would have inevitably met opposition from the bondholders due to heightened credit risks,” HLIB said in a report today.
The firm said such a scenario would have required compensation paid to the bondholders to facilitate the sale. Consequently, plans to reduce toll rates by a minimum of 18 per cent may be derailed.
Last week, Prime Minister Tun Dr Mahathir Mohamad confirmed media reports that the government would not sell PLUS to the private sector.
Dr Mahathir also indicated that toll rates would be cut by 18 per cent by extending the outstanding concession period by 20 years.
In total, four unsuccessful bids for PLUS were tabled to the government – Tan Sri Halim Saad (100 per cent equity stake for RM5.2 billion), Widad Group (RM5.3 billion cash offer translates to enterprise value offer of RM38.4 billion), RRJ Capital (100 per cent equity for RM3.5 billion) and Tan Sri Abu Sahid Mohamed (enterprise value offer of RM34.9 billion).
HLIB said with the extension of the concession period by 20 years, Edgenta PROPEL’s tenure as maintenance contractor for the North-South Expressway might possibly be further extended.
The firm maintained its “buy” call on UEM Edgenta with a target price of RM3.56.
Meanwhile, HLIB said there was no mention for the fortunes of another four toll roads (LDP, Kesas, Smart and Sprint) undergoing an acquisition attempt by the government.
“However, a sale of the four tolled highways looks increasingly likely as it does not contradict the government's policy on tolled highways, as evident by the non-sale of PLUS,” it added.