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This article first appeared in The Edge Malaysia Weekly on November 13, 2023 - November 19, 2023

PERMODALAN Nasional Bhd is expected to raise up to RM1.5 billion from the listing of its highways, which is slated to take place next year.

According to sources, the listing, which would value the highway trust at an estimated RM3.5 billion, will be closely watched as it would set the template for other highway concessionaires looking to unlock the value of their assets.

Anticipated to take place next year — possibly by March — the listing of Prolintas Infra Business Trust (Prolintas Infra BT) will be the largest in recent years, beating those of Farm Fresh Bhd and CTOS Digital Bhd.

Khazanah Nasional Bhd-backed Farm Fresh was listed in March 2022, valuing the dairy producer at RM2.5 billion while the initial public offering (IPO) of CTOS Digital in June 2021 valued the credit reporting agency at RM2.4 billion.

Sources say the listing of PNB’s highway assets came about following the government’s green light for the change in the shareholding of the highways. “The changes in shareholding of the highways needed government approval, hence the delay in the listing,” says a source.

The listing will see PNB’s highway concessionaire Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) carve out four of the six highways it owns and operates and place them in a business trust for listing. It will be the country’s first listed highway trust.

The IPO will see PNB put up for sale an equity stake of 42.61% for the trust to be established by the end of this year. This will involve an offer for sale of up to 468.7 million units, according to its draft prospectus that has been put up on the Securities Commission Malaysia’s website. While no pricing is revealed in the draft prospectus, the IPO is finally moving ahead after it was first mooted in 2017.

PNB, which previously declined comment on a story about the listing being back on track when The Edge reached out to the company in June, reiterated its stand in an email reply last Friday that it would not comment on speculation as a matter of policy.

Of the units to be put up for sale in the IPO, the biggest chunk of 422.949 million will be for local and foreign institutional and selected investors, including bumiputera investors, at an institutional price to be determined by way of bookbuilding, its draft prospectus shows. The remaining 4.16%, or 45.75 million IPO units, will be offered to eligible directors, employees and the Malaysian public at a retail price to be fixed.

The four highways that will be injected into the trust are the Ampang-Kuala Lumpur Elevated Highway (Akleh), Guthrie Corridor Expressway (GCE), Lebuhraya Kemuning-Shah Alam (LKSA) and Sistem Lingkaran-Lebuhraya Kajang (Silk). The two newer highways Prolintas owns — the Damansara-Shah Alam Elevated Expressway (DASH) and Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) — are not included in the exercise.

To facilitate the listing, the government on Oct 12 last year inked separate agreements to restructure the four highways’ toll rates and extend their concession periods.  

Akleh now has 13 years and eight months left on its concession, GCE has 38 years and eight months, and LKSA and Silk have 38 years and 10 months, the draft prospectus shows.

The subsidiaries under which the four highways are parked collectively made revenue of RM384.16 million in FY2022 — up from FY2021’s RM365.8 million. They made a net loss of RM11.28 million in FY2022, versus a net profit of RM142.65 million in FY2021.

Their assets totalled RM3.28 billion in FY2022, compared with RM3.39 billion in FY2021, while liabilities stood at RM3.03 billion in FY2022 (of which RM378.4 million are current), versus RM3.11 billion in FY2021 (current: RM489.21 million).

Their collective net gearing is high, at 8.2 times in FY2022, though down from 13.4 times in FY2020. And prior to listing, the trust will secure financing facilities of up to RM2.7 billion from Bank Pembangunan Malaysia to refinance its outstanding debt and fund its working capital and additional capital expenditure.

Meanwhile, following the toll rate restructuring that largely lowered the rates the highways can charge in exchange for longer concession periods, they are estimated to collect lower revenue of RM317.56 million in FY2023 and RM306.88 million in FY2024.

Based on the trust model, Prolintas Infra BT plans to distribute at least 90% of its earnings to unitholders. It intends to distribute RM66 million to unitholders for FY2024.

Bankers feel that for the trust to be attractive, the distribution yield will have to be no less than 5.5% to attract investors, given the current high interest rate environment that has bumped up fixed deposit rates. And it should at least top the Employees Provident Fund’s dividend rate, which was 5.35% for 2022.

“While the trust group had deposits, cash and bank balances of RM315.4 million as at Dec 31, 2022, its profits were impacted by non-cash expenses such as amortisation of highway development expenditure. A business trust structure allows the trustee-manager to distribute income to unitholders from the cash flow generated by the business without being constrained by accounting profits,” the draft prospectus notes.

AmInvestment Bank Bhd is the principal adviser, lead bookrunner and managing underwriter for the listing. It is also the joint bookrunner and joint underwriter, together with CIMB Investment Bank Bhd and Maybank Investment Bank Bhd.


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