It is just a short-term solution

KUALA LUMPUR: A RM3 billion takeover bid for PLUS Malaysia Bhd from a Malaysian-led Hong Kong-based private equity firm RRJ Capital is only a “short-term solution”, economists said.

They said it would not really address public concerns of having affordable toll rates and eventually free toll.

RRJ, led by Malaysian brothers Richard and Charles Ong, had submitted a proposal to buy all of PLUS for RM3 billion to Khazanah Nasional Bhd and Minister of Works Baru Bian last week, according to the Edge, quoting sources.

If the bid was accepted, RRJ – which was said to have US$15 billion in assets under management – would reduce toll rates by 20 per cent across the board, it added.

“The cash offer of RM3 billion is good but most importantly it is whether this is the utmost priority for the government,” Putra Business School business development manager Associate Professor Dr Ahmed Razman Abdul Latiff told the New Straits Times.

Razman said if the deal went through, the users would still have to pay toll fares at longer period albeit at a reduced rate.

This is not what the government promised in their election manifesto, he added.

“Accepting this cash offer is more like a short-term solution and not really addressing people’s concern of having affordable toll fare and eventually free toll,” he added.

An industry player involved in the highway sector said the acquisition value seems fair but at the lowest range of PLUS’ equity value.

“The offer should be between RM3 billion and RM6 billion. Being a buyer in the deal, they would always look for the lowest price for the purchase,” said the expert who wanted to remain anonymous.

The RM 3 billion value came from future cash flows that take into account of 20 per cent discount on toll fare, he added.

From a business point of view, an investment bank analyst said the government did not need to own the concession.

“I believe the deal should be viewed commercially and be allowed to go ahead if the concession terms are fair for the people and the government,” he said.

A private entity can take over the concession if it is a credible entity with strong financial position and expertise to run the toll road operation more efficiently and at lower cost, he added.

Further, the analyst said the offer price seems reasonable for the equity owned by Employees Provident Fund.

Khazanah owns 51 per cent of Plus via UEM Group Bhd while the Employees Provident Fund (EPF) holds the remaining 49 per cent.

He said it was not feasible for the government to make highways toll free given its current financial position.

“So a reduction in toll rates and no further escalation is a more workable solution,” he added.

Source: NST