PLUS Expressways Bhd (PEB) is the largest toll expressway operator in Malaysia as well as in Southeast Asia. The company was founded in 1986 and was listed on the Main Board of Bursa Malaysia on July 17, 2002.

PLUS Expressways operates a number of tollroad concessions primarily in Malaysia, as well as in India and Indonesia. The tollroads the group wholly owns in Malaysia include Projek Lebuhraya Utara-Selatan Berhad (North South Expressway), Expressway Lingkaran Tengah Sdn Bhd (Elite), Linkedua (Malaysia) Berhad and Konsortium Lebuhraya Butterworth-Kulim (KLBK) Sdn Bhd.

PLUS Expressways is a subsidiary of UEM Group Bhd, which in turn, is owned by state investment agency Khazanah Nasional Bhd. Due to its strong cash flows, it is eyed by a number of parties, most recently MMC Corp and privately held Asas Serba Sdn Bhd.

In the following email interview, PLUS Expressways shares its views on the company’s business, strategies and growth outlook.

TEFD: What are the group’s competitive strengths and advantages?
Noorizah: PLUS Expressways has over 20 years of experience in the highway industry and is well-positioned to capture growth opportunities in new markets. We have established a presence in India and Indonesia and are now strengthening our position in the growing road infrastructure market there.

What have been the achievements of the group in the past four years (since 2006)?
Over the last four years, we expanded our domestic operations and more significantly, made inroads overseas. On the local front, we acquired Elite and Linkedua in 2007, KLBK in 2008, and Touch ‘N Go Sdn Bhd and Teras Teknologi Sdn Bhd in 2010.

We secured two highway concessions each in India and Indonesia. In India, we were awarded the Bhiwandi-Kalyan-Shil Phata Highway concession in 2006, and commenced operations in August 2009. We signed the SPSA in January 2010 for the Padalur-Trichy Highway, and commenced operations in May 2010.

In Indonesia, we signed the SSA in 2006 for the Cikampek-Palimanan Expressway, and were awarded the tender for the Cimanggis-Cibitung Expressway in 2007.

What has been the group’s strategy for expansion? How have these strategies turned out?
PEB continues to drive business growth and actively seeks value-accretive expansion opportunities, both locally and overseas.

In 2009, we continued to focus on overseas expansion opportunities in India and Indonesia while exploring opportunities to export our expertise by way of consultancy and technical services. In India, tolling operations for the Bhiwandi-Kalyan-Shil Phata Highway (BKSP), our maiden Indian highway project, began on Aug 22, 2009.

Despite the initial teething problems that beset this start-up operation, we are happy with the way the project has progressed. The BKSP project has served us well as a learning platform and we will take key lessons from our investment here and leverage on these for the group’s further expansion into India’s rapidly growing infrastructure market.  

In January 2010, network expansion through strategic overseas acquisition came by way of our acquiring a 74% equity stake in Indu Navayuga Infra Project Private Limited (INIPPL) for approximately RM74 million. INIPPL is the concessionaire for the existing two-lane dual carriage highway from Km285 to Km325 of the National Highway No 45 in Tamil Nadu, India.

The acquisition will be carried out in two tranches: the first tranche of a 49% equity stake will be acquired upon fulfilment of certain conditions including the project’s full commercial operation (which commenced in May 2010), while the remaining 25% stake will be acquired on the third anniversary of the project’s commercial operation date.

This acquisition signifies our seriousness in growing our business in India and in becoming a premier global expressways group. This build-operate-transfer project will effectively add another 173 lane-km to our existing expressways base.

Together with our joint bidding partner, IDFC Projects Limited (Consortium), we won a tender bid for the proposed Four Laning of Jetpur-Somnath highway in the State of Gujarat, India. The proposed project is a section of the National Highway 8D with total length of 127.6km.

With regard to the 116-km Cikampek-Palimanan Toll Road project in Indonesia, we have made significant headway relating to the land acquisition progress as well as our negotiations with the regulatory authorities and bankers. We are encouraged by the momentum achieved and are looking forward to getting this project off the ground by next year.

How is the group positioning itself within your industry?
Back on the domestic front, we completed the integration of the operations of Elite, Linkedua and KLBK. Today, PEB owns approximately 60% of Malaysian toll roads in terms of km length and 75% of the nation’s inter-urban highways.

These developments on the Malaysian front, together with the commencement of tolling operations for the BKSP Highway in India and the inclusion of INIPPL’s 173 lane-km have enabled the group to achieve 33.5% lane-km growth over the last three years against the KPI target of 30% growth by end-2009.

This translates into an additional 1,218 lane-km over our initial base of 3,640 lane-km, giving us a total asset base of 4,858 lane-km of expressways as at end-2009.

Did the financial crisis in late 2008/2009 have any impact on the group? What about the current economic turmoil in Europe?
The year kicked off on an uncertain note with our expressways experiencing flat traffic growth. However, as the months passed by, traffic patterns began to change for the better.

As our highways serve major cities and tourist spots in the country, we have benefited from an increase in traffic growth surpassing our expectations.

As we set in place the strategies to drive growth, PLUS turned in traffic volume growth of 7.1% while Elite, Linkedua and KLBK recorded traffic volume growth of 9.3%, 11.4% and 4.4% respectively. PLUS’ impressive traffic growth over 2009 came as a pleasant surprise to us, as we had initially projected lower growth because of the unfavourable economic conditions.

As a result of this strong traffic volume growth, we registered RM2.4 billion in toll collection, a strong 5.8% increase over the preceding year’s figure. PLUS recorded toll collection of RM2 billion on the back of traffic volume growth of 7.1%, while Elite, Linkedua, KLBK and BKSP registered toll collection totalling RM352.5 million.

What are the group’s plans for the future, both short-term and long-term? What are your group’s plans to compete in the increasingly globalised environment?
The group is set to unlock further growth opportunities locally and abroad by building upon our existing core competencies.

Our expansion strategy is based on the strength of our position as the country’s premier toll expressway owner and operator. While the toll expressways business remains our primary focus, we will also explore the provision of consultancy and technical services as well as toll road operation and maintenance services.

India and Indonesia will continue to be our focus countries going forward as we have garnered invaluable experience from working in these two countries which hold much potential for the group. With regard to other markets where we have limited experience, we may consider providing consultancy and technical services or making minimal equity investments until we establish a level of comfort.

This article appeared in The Edge Financial Daily, October 12, 2010.