This article first appeared in The Edge Malaysia Weekly on July 15, 2024 - July 21, 2024

IJM Corp Bhd’s (KL:IJM) share price has gained close to 85% so far this year, hitting a multi-year high of RM3.47 in intraday trading most recently on July 3.

The strong gain in IJM’s stock has fuelled talk that something is brewing at its highway concession operations, specifically wholly-owned New Pantai Expressway Sdn Bhd (NPE), which has a 34-year concession with about 13 years left on it if not extended.

In an exclusive interview with The Edge, IJM group CEO and managing director Lee Chun Fai is guarded, but says, “We want to sort out the restructuring of our concession in the NPE [New Pantai Expressway] … We are getting there.

“[We need to] solve traffic congestion [on the NPE]. If you know the NPE, you know where it terminates in Bangsar; and the other end on the North-South Expressway is congested.”

Without disclosing details, Lee confirms that plans to ease congestion by extending the NPE directly to the city centre and bypassing Bangsar are being finalised. If this addition takes place, IJM’s NPE concession could be extended. The 19.6km NPE, which was officially opened in April 2004, runs from Subang Jaya and Bandar Sunway to the city centre.

Pressed for details, Lee says, “We hope to sort it out by this financial year. [There are] quite a bit of things that we hope we can sort out this year.”

For its financial year ended March 2023, the company NPE chalked up an after-tax profit of RM69.02 million on revenue of RM174.31 million. As at end-March, it had total assets of RM461.71 million, total liabilities of RM100.14 million and retained earnings of RM74.13 million.

Other than wholly-owned NPE, IJM also wholly owns Besraya (M) Sdn Bhd, whose concession to operate the 28.9km Sungai Besi Highway ends in 2046 (previously 2040 before toll restructuring in 2022); a 50% stake in Lebuhraya Kajang-Seremban Sdn Bhd, which has a concession to run the 44.3km Kajang Seremban Highway (Lekas) through 2064 (previously 2039); and an effective 41% shareholding in the 233km West Coast Expressway Sdn Bhd, which is 80%-controlled by publicly traded WCE Holdings Bhd (KL:WCEHB).

IJM has a 26.65% stake in WCE Holdings, and its wholly-owned Road Builder (M) Holdings Bhd has a 20% direct stake in the West Coast Expressway.

IJM also has four highways in India: the 79km Chilakaluripet-Vijayawada Tollway; the 19.8km Dewas Bypass Tollway (under construction); the 109km Solapur-Bijapur Tollway (under construction); and the 56km Western Access Tollway in Buenos Aires, Argentina.

IJM is also in talks with Selangor authorities to construct more highways in the south of the state.

In March this year, it was announced that IJM, Permodalan Negeri Selangor Bhd (PNSB) and Lim Seong Hai Capital Bhd (LSH) (KL:LSH) were collaborating to improve the road transport infrastructure in the southern districts of Selangor under the Southern Selangor Integrated Regional Development plan, focusing on Sepang and Kuala Langat and introducing key transport links to improve connectivity, reduce travel time and create new development corridors.

Lee explains: “There are two types of road development: One solves traffic congestion; [the other involves] the aspect of growth. We are working with PNSB and LSH on how to build roads and develop the space [southern Selangor].

“We are working with the state to come up with the alignment. We have [come up with] three alignments, which are going through due process with the state government … Some involve state land; some will need land acquisition. When you build a highway for development, if you’re not solving traffic congestion, there is not enough traffic to justify the investment … But I’m doing [the state] a favour.”

Meanwhile, plans for southern Selangor are still in the early stages.

IJM’s concessions assets — highways and port operations — are parked under Road Builder, which registered an after-tax profit of RM51.71 million on revenue of RM669.62 million in its financial year ended March 2023.

As at end-March 2023, Road Builder had total assets of RM7.05 billion, total liabilities of RM7.33 billion and retained earnings of RM794.12 million.

All eyes have been on IJM’s plans for its toll road assets since Gamuda Bhd (KL:GAMUDA) hived off its four highway concessions — 70% of Kesas Sdn Bhd; 51.6% of Sistem Penyuraian Trafik KL Barat Sdn Bhd (SPRINT); Lingkaran Trans Kota Sdn Bhd and Syarikat Mengurus Air Banjir & Terowong Sdn Bhd (Smart Tunnel) — to Amanat Lebuhraya Rakyat (ALR) for RM2.3 billion in August 2022.

In 2022, IJM dismissed rumours that it was seeking to sell some of its toll highways to ALR.

More recently, in March this year, Prolintas Infra Business Trusts was floated on Bursa Malaysia at an IPO price of 95 sen. Prolintas, which is 51%-controlled by government-linked investment company Permodalan Nasional Bhd (PNB), raised RM445.3 million from the offer-for-sale of 468.7 million units, or a 49% stake, in the company.

Asked which route IJM was looking to take to monetise its toll road assets, Lee says: “Ours is most probably along the same lines as Prolintas … Whether it’s a trust or through a corporate structure — to me, it’s just flavouring. At the end of the day, it’s still a monetising process. The thing is, we want to reduce our balance sheet [gearing].

“How much money we can raise depends on the stake that we want to sell down. The route [has yet to be decided], but we just want to sort out the parameters. Fifty per cent [of the highway] is the maximum limit; we don’t want anything more.”

For  FY2024 ended March this year, IJM raked in RM600.28 million in net profit from RM5.92 billion in revenue. Toll roads regis­tered RM128.31 million in profit from RM519.55 million in revenue.

As at end-March this year, IJM had deposits, cash and bank balances of RM2.87 billion; on the other side of the balance sheet, the company had short-term borrowings of RM1.72 billion and long-term borrowings of RM1.09 billion.

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