Fund says valuation derived from extension of toll concession and its second phase

PETALING JAYA: The Employees Provident Fund (EPF) has defended its purchase of the concessionaire for the Duta-Ulu Klang Expressway (Duke), citing several key reasons to justify the high valuations of the toll operator.

The proposed RM1.13bil purchase of a 40% stake in Nuzen Corp Sdn Bhd from Ekovest Bhd came under scrutiny as it now values the company and its highway assets at RM2.8bil.

Note that just three years ago, Ekovest had bought a 30% stake in Nuzen from Malaysian Resources Corp Bhd (MRCB) for RM228mil, valuing the company at RM760mil.

“The valuation for the 40% stake was derived from the extension of Duke 1’s toll concession from 34 years to 54 years with a 10-year extension option. Additionally, it also took into account the valuation of the new Duke Phase 2, which is under construction and due to be completed in mid-2017,” the fund explained in a reply toStarBiz.

“We wish to state that this acquisition is subject to the highway achieving the same returns we have been expecting from the other highways and infrastructure that we invest in,” it added.

Ekovest secured the 53-year concession in January this year, or eight months prior to the stake sale to the EPF. Plans for the Duke 2 and Duke 3 highways were also announced after the company’s 30% stake purchase from MRCB.

Last week, Ekovest announced that it planned to sell a 40% stake in Nuzen to the EPF for RM1.13bil.

Nuzen, the parent company of Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd, holds the concession for the Duke highways.

Questions arose following the deal’s announcement, as it now values Kesturi and its assets at RM2.8bil.

Ekovest managing director Datuk Seri Lim Keng Cheng recently told StarBizWeek in an interview that the proposed disposal’s valuation was fair and reasonable and had been done with stringent due diligence.

According to the EPF, it is currently conducting its own due diligence exercise regarding the deal, which includes an independent traffic study and financial and legal assessments.

“The EPF had previously acquired a number of highway assets and the expected project return for the investment in Duke is in line with its other highway investments,” it said.

The EPF already has substantial exposure in owning highway assets with a 49% stake in the North South Expressway. In 2014, it paid Taliworks Corp Bhd RM69mil for a 49% stake in Cerah Sama Sdn Bhd, whose wholly owned unit, Grand Saga Sdn Bhd, owns the concession of the Cheras-Kajang Highway.

Additionally, last year, it had acquired from Taliworks a 37.5% stake in Grand Sepadu Sdn Bhd, the concession holder of the New North Klang Straits Bypass Expressway.

Source: http://www.thestar.com.my/business/business-news/2016/09/30/epf-defends-duke-highway-buy/