This article first appeared in The Edge Financial Daily on April 27, 2017 - May 3, 2017

KUALA LUMPUR: PLUS Malaysia Bhd confirmed yesterday that highways operated by the company will not be increasing toll rates for now.

“The government has already said that there will be no toll hike for us now,” said its managing director Datuk Azman Ismail (pic). “We don’t have anything to add or to comment except to abide [by] the directive and decision of the government.

“As far as PLUS is concerned, we have received, or in some instances will be receiving, due compensation from the government with respect to their decision not to raise toll fares,” he told reporters during a site visit to the Sungai Besi toll plaza to inspect the implementation of the full electronic toll collection system.

PLUS was scheduled to increase toll rates by 5% for four highways from Jan 1, 2016, but the government has said that there will be no increase in 2016 and 2017.

Azman declined to comment when asked if the toll hike deferment is a political decision, saying “I am not the right person to answer that”.

Data from Malaysian Rating Corp Bhd (MARC) show PLUS booked some RM268.7 million of toll compensation from the government as its revenue for the first nine months of 2016.

According to the latest cash flow projection by MARC, PLUS’ finance service coverage ratio is expected to remain adequate, “assuming that PLUS will receive compensation from the government in a timely manner in lieu of a toll hike deferral”.

“Prolonged delays in toll rate increases as per the concession agreement, coupled with the absence of government compensation throughout the concession period, will result in a finance service coverage ratio of below two times in 2026,” MARC said in a statement on April 18.

Azman said PLUS expects its average daily volume of traffic to grow in tandem with the country’s economic growth of between 4% and 5%.

“Traffic growth tracks the movement in gross domestic product growth, as highways are one of the many proxies that reflects the country’s economic condition,” he said, noting that some 500 million cars flow on PLUS highways on a yearly basis.

Azman said traffic growth would also be dependent on petrol price movement, adding that the growth also showed a “high uptick” during long weekends, holidays and festival seasons.

On whether PLUS is on the lookout to acquire brownfield highways to boost its earnings growth, he said: “The company has no plans to do so yet.

“There are other areas that we can grow besides pursuing a merger and acquisition route. For example, we can grow our non-toll income, such as from our ‘Rehat & Rawat’ centres, highway advertising and even events,” he added.

PLUS is controlled by UEM Group Bhd, a subsidiary of Khazanah Nasional Bhd, with a 51% stake, while the remaining 49% is held by the Employees Provident Fund.

Data from the Companies Commission of Malaysia show that for the financial year ended Dec 31, 2015, the group raked in RM34.08 million in after-tax profit on a revenue of RM4.17 billion.

PLUS has implemented its fully electronic toll collection system at all of its 94 toll plazas throughout Peninsular Malaysia with effect from yesterday.

“The use of Touch ’n Go cards will allow one toll booth to process 10 cars in one minute, while the use of Smart Tag will allow one toll booth to process 16 cars in one minute,” said Azman. “For cash payment of toll fares, one booth can only process three cars in one minute.”