An earlier version of the table wrongly stated the maximum end-concession date of KESAS as 2038 instead of 2034. The error is regretted. 

KUALA LUMPUR (April 7): Amanat Lebuhraya Rakyat Bhd's (ALR) proposed takeover of the four highway concessionaires linked to Gamuda Bhd is expected to conclude in end May or early June this year, according to Gamuda deputy group managing director Mohammed Rashdan Mohd Yusof.

The RM5.48 billion offer by ALR was officially received by the holding companies of the concession holders on April 2.   

Speaking to The Edge in an interview on Wednesday (April 6), Rashdan said Gamuda is looking to conduct the extraordinary general meeting (EGM) in the third week of May to seek approval from its shareholders.

“Once we get the green light from shareholders, then the week after that they (ALR) can issue the sukuk and pay us (Gamuda)... hopefully by end-May or early June,” he said.

The exercise will also require the approval of bondholders of the concessionaires. It is understood that ALR is also seeking to have the same bondholders subscribe to its sukuk that will be issued to fund the acquisition.

The highway toll concessions comprise Kesas Sdn Bhd (KESAS Expressway), Sistem Penyuraian Trafik KL Barat Sdn Bhd (SPRINT Expressway), Lingkaran Trans Kota Sdn Bhd (Damansara-Puchong Expressway or LDP) and Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (SMART Tunnel).

Gamuda owns 70% of KESAS, while the balance 30% is owned by Perbadanan Kemajuan Negeri Selangor (PKNS). SMART is a 50:50 joint venture between MMC Corp Bhd and Gamuda.

Lingkaran Trans Kota Holdings Bhd (Litrak) has a 50% interest in SPRINT, while Gamuda and KPS hold 30% and 20% respectively.

Lingkaran Trans Kota Sdn Bhd, which runs the LDP, is 100%-owned by Litrak, in which Gamuda also owns 43.2%.

ALR, a not-for-profit entity, has received the mandate from the government to take over the concessionaires in order to restructure them by capping existing toll rates, while extending concession periods and eliminating any compensation by the government from the changes.

The proposed acquisition valued the four concessions at RM5.48 billion -— comprising RM2.06 billion debt and RM3.42 billion equity — and will be entirely debt-funded by RM5.5 billion sukuk to be raised by ALR.

Gamuda, which has been highly supportive of the proposal, would welcome any competitive bids over ALR’s offer, Rashdan said, although he does not see any significant challenger. This was due to ALR’s average cost of capital at under 5%. ALR’s sukuk will have a maximum tenure of 15 years, he added.

Gamuda previously stated that the four concessions could end in May 2032, if the compounded annual growth rate in traffic meets a projected 1.7% to provide the cash flow needed to fund the highways’ maintenance and to redeem the sukuk by then.

Based on independent consultant Jacob’s 1.7% projected growth in traffic, the longest extension for the highway concessions will likely be under four years involving KESAS, and a reduction of over 10 years for SMART, said Rashdan (see table).

Comparatively, the aggregate annual traffic growth for the four concessionaires averaged at 2% the last 15 years, excluding the two years of the Covid-19 pandemic.  It is understood that the traffic growth rate for KESAS stood at around 1.7%, and 1% for LDP as it is a mature highway.

Gamuda also said the four highways are unlikely to incur additional capital expenditure (capex) due to the nature of the highways. For example, it said the LDP is unlikely to be expanded, while the SMART Tunnel’s extension SMART 2 is a separate highway project.

“There’s no more room for expansion. There won’t be any major capex, just O&M (operations and maintenance),” said Rashdan.

Presently, the government is already compensating the four concessionaires for maintaining toll rates in recent years. Gamuda alone received RM386 million in compensation from the government for 2021.

However, ALR, which will be taking over the concessions, will ink an extension to the concession agreement with the government — at a maximum of six years for KESAS and SMART, and up to 10 years for LDP and SPRINT — as a “buffer” if traffic growth falls short of the projected 1.7%.

The new concession agreement will have a new clause where ALR will have to return the concession when the debt is fully repaid, while the toll rates will be fixed at current levels. Hence, there will be no compensation from the government, Rashdan explained.

Analysts viewed ALR’s offer as positive for Gamuda. The completion of the deal would strengthen Gamuda’s balance sheet and leave it in a net-cash position of around RM584 million, putting it in a good position to bid for future infrastructure projects such as the MRT3 Circle Line.

On Gamuda’s balance sheet, Rashdan said the group is already in a good position, with net gearing of 0.18 times prior to the highway sale, which indicates it is well positioned to take on more projects even if the sale does not materialise.

Shares in Gamuda ended two sen or 0.56% higher to RM3.59 on Wednesday (April 6), giving it a market capitalisation of RM9.17 billion.