ANNOUNCEMENT ON TOLL ROADS BY FINANCE MINISTER

The ruling government promised in its manifesto that it will gradually abolish tolls over the next five years, and should the government take over all toll operators’ debt obligations, it will need to pay over RM55 billion, excluding compensation. In a separate report, finance minister Lim Guan Eng was quoted as saying the promise to abolish tolls will be looked at once the country’s financial situation improves.

MY VIEW ON TOLL ROADS

This may be good news for Litrak, Ekovest, WCE and other listed toll roads.  It is not only about paying back the debt obligations and equity participation, the compensation for equity should include the present value of future net cash flow belonging to the equity holder.  In addition, the government has to fork out yearly for maintenance, normally about 50% of the total revenue. Using debt of RM55b, and interest rate of 6%, interest of RM3.3b, say interest is about 15% of revenue, total revenue is RM22b and maintenance will be roughly RM11b a year.

So, government has to come up with say debt settlement, RM55b, and equity settlement about RM25m and compensation of say RM70-100m (normally a toll road is sold for 3-5times of equity capital depending on cashflow, even loss making SILK was paid 3 times by PNB).  So total debt + compensation = RM55b + RM85b = RM140b and not to forget, have to incure maintenance of rughly RM11b a year.  No joke.  Not forgetting corporate tax loss.

I hope Pakatan will be transparent in the compensation to the toll road operators and wise about taking over all the toll roads, is not meant for getting votes, but being wise not to burden the entire country.  Politic talk and business talk is DIFFERENT.  Politic talk is to get vote, not to make money.

So, it may be worth a while to look at listed toll roads that has been "overly" bashed down.

ANY MORE BAD NEWS FROM PH?

For the last 70 days or so, all we hear is bad news, mega projects cut, IPP cut, broadband fee rate cut, construction cost cut, cabinet salary cut, GLC's CEO remuneration cut, head count cut, and Tun Mahathir even said, if we take action to all civil servants that is corrupted, the civil servat departments will be empty and no one will run the country.  So, must catch all the BIG fish first, then the second layer then the third and so on.