This article first appeared in The Edge Malaysia Weekly on June 12, 2023 - June 18, 2023

PERMODALAN Nasional Bhd (PNB) has put in place plans to list its highway concessionaire Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) in what could be one of the biggest listings in two years.

Sources say the exercise is still being worked out and bankers have been appointed to look into the possible flotation exercise of the company that has six city highways under its belt. 

“Prolintas is estimated to raise between US$300 million and US$400 million (RM1.38 billion and RM1.84 billion). The initial public offering (IPO) is expected to be in the fourth quarter of this year, depending on the market condition,” a source says.

Another source says, “PNB and Prolintas are in the midst of getting the relevant approvals from the government for the flotation exercise and it is unlikely to face any resistance.”

PNB declined to comment when contacted. The country’s largest fund management company stated that “with reference to the enquiries regarding Prolintas, as a matter of policy PNB does not comment on speculation”.

PNB and Prolintas are said to be mulling an infrastructure trust model. “It’s similar to the real estate investment trust model,” says a source.

Should the deal go through, the Prolintas IPO would be bigger than the listing of Farm Fresh Bhd in 2021 and would be the first infrastructure trust on Bursa Malaysia.

According to Prolintas’ latest financial results, the company had total assets of RM17.33 billion as at end-December 2022 — 13.3% higher than RM15.29 billion in 2021. Its total liabilities stood at RM14.32 billion at end-2022, an increase from RM12.51 billion the year before.

Prolintas suffered after-tax losses of RM172.68 million for the financial year ended December 2022 (FY2022) compared to a profit after tax of RM142.61 million a year earlier. The company may have slipped into the red as it had just completed the construction of the Damansara-Shah Alam Elevated Expressway (DASH) last October, a 20.1km highway with 13 interchanges. The highway links Puncak Perdana in Shah Alam with Penchala in Damansara.

Revenue, however, surged 15.5% to RM369.99 million in 2022 from RM342.67 million in 2021.

Last October, the government gave the green light to a proposal by Prolintas to restructure four highway concessionaires. The restructuring was aimed at reducing the toll rates at its highways, namely the Ampang-Kuala Lumpur Elevated Highway (Akleh), Guthrie Corridor Expressway (GCE), Kemuning-Shah Alam Highway and Kajang Dispersal Link Expressway (also known as Kajang Silk).

It is learnt that Prolintas has the approval in principle for an extension of the concession periods for the four highways in return for upgrading them and not increasing the toll rates. The extension periods for some of the concessions are much more than 10 years.  

“The extension of the concession [periods] makes a listing feasible,” says a source.

Sources say the extensions were much longer than what was given to Amanat Lebuhraya Rakyat Bhd (ALR), the vehicle that has taken over four highways from Gamuda Bhd and two other companies. ALR was given an extension of between six and 10 years in return for not increasing the toll rates.

However, the highways under ALR are mature with no room for expansion. In contrast, sources say some of the highways under Prolintas have room for expansion to cater for growing traffic, hence the longer extension in the concession periods.

For instance, the government gave Anih Bhd, the concessionaire for the East Coast Expressway, a 37-year extension in return for expanding, upgrading as well as flood mitigation works on the highway costing some RM2.5 billion.

According to Prolintas’ website, the company — through its subsidiaries — designs, constructs, operates and maintains Akleh, GCE, Kemuning-Shah Alam Highway and Kajang SILK.

Prolintas is in the process of completing the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE), the construction of which started in 2016. SUKE has 14 interchanges along its 24.4km main line length and connects Sri Petaling with Bukit Antarabangsa. The stretch that is now open is from Cheras-Kajang to Bukit Antarabangsa.

A source says the Prolintas infrastructure trust IPO is unlikely to include the newly completed DASH and SUKE as the traffic on the highways is still low and will drag down the valuation.

“However, the highway trust will be the vehicle to house all highways under PNB such as DASH and SUKE when they become viable,” says a source.

Thus, the initial indication is that the planned IPO is likely to have four highways — Akleh, GCE, Kemuning-Shah Alam Highway and Kajang SILK. Among the four, Akleh and Kajang SILK are experiencing heavy traffic and require upgrade and expansion works.

News of the listing of Prolintas has been making the rounds since 2017. It was first mooted by former PNB chairman Tan Sri Wahid Omar and he had targeted to list the company between 2018 and 2019.

In 2017, PNB bought Kajang SILK for RM380 million. This followed failed attempts to buy Kajang SILK by IJM Corp Bhd’s unit Road Builder (M) Holdings Bhd (RM398 million cash offer in 2014) and Citaglobal Bhd (then known as WZ Satu Bhd), which offered RM368 million last year, to be satisfied with RM239.25 million cash and WZ Satu shares.

At the time, the acquisition of the highway had been touted as a means to expedite the listing of Prolintas, but the idea was later shelved after a change in management at PNB as well as the Covid-19 pandemic that brought many major economic activities to a standstill.

Prolintas’ IPO should attract much interest as there are fewer listed highway operators now, following the acquisition of four concessionaires — Shah Alam Expressway (Kesas), Western Kuala Lumpur Traffic Dispersal Scheme (SPRINT Highway), Lebuhraya Damansara-Puchong (LDP) and Stormwater Management and Road Tunnel (SMART) — by not-for-profit entity ALR from Gamuda, Lingkaran Trans Kota Holdings Bhd and Kumpulan Perangsang Selangor Bhd.

The remaining listed concessionaires on Bursa Malaysia include IJM Corp, which owns the Sungai Besi Expressway (Besraya), New Pantai Expressway (NPE) and Kajang-Seremban Expressway (Lekas); Ekovest Bhd that operates the Duta-Ulu Kelang Expressway (DUKE); WCE Holdings Bhd, the concession owner of the 233km interstate West Coast Expressway, which is now under construction; and Ahmad Zaki Resources Bhd that owns the East Klang Valley Expressway (EKVE), which is also currently under construction.

It is worth noting that IJM Corp has a 26% stake in WCE Holdings, which has yet to complete the highway that runs along the coastline of Selangor and to Taiping in Perak.

“There are no pure highway concessionaires that are listed to cater for investors seeking steady dividend returns,” says an investment banker.

Last Friday, IJM Corp closed at RM1.83 per share, giving the company a market capitalisation of RM5.66 billion. WCE Holdings ended trading at 50 sen for a market capitalisation of RM1.49 billion; Ekovest traded last at 37 sen, valuing the company at RM997.5 million; while Ahmad Zaki closed at 19.5 sen for a market value of RM116.3 million. 

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