Published April 2, 2009

MCA backs DAP's call for govt to buy out Plus

By PAULINE NG
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

CALLS for the government to take Malaysia's biggest highway concessionaire private appear to be gathering steam. A senior component party of the ruling federal coalition Barisan Nasional is the latest to back the idea.

The Malaysian Chinese Association (MCA) on Tuesday suggested that public interest would be better served if the government acquired the remaining shares in listed Plus.

Because its proposal comes on the heels of one made by the opposition Democratic Action Party (DAP), some view it as 'more of a political statement'.

However, the push comes amid hefty government compensation payouts to toll concessionaires. In the recent RM60 billion (S$25 billion) stimulus package, a whopping RM480 million was slated for toll subsidies so that consumers would ostensibly have more cash for other spending.

Proponents of a government buyback maintain that, in the longer term, it would be cheaper for the authorities to acquire these concessionaires.

Although there are more than 20 tolled highway concessionaires in West Malaysia, Plus is the main target since it operates the country's largest network of tolled roads, including the North-South Expressway (NSE).

Since the government's effective interest in Plus - mainly through Khazanah Nasional - is nearly 75 per cent, nationalising it ought to be easy, especially with the depressed share price.

Proponents say that a RM3.30 to RM3.50 per share general offer to minorities - over its current price of about RM3 - would only cost the government about RM4.6 billion. Together with Plus's long-term debts of about RM9.4 billion, the total acquisition cost would total RM14 billion - a sum that could be funded by the issue of government bonds.

Plus's cash flow remains strong, and MCA calculated that even excluding government compensation for scheduled increases not allowed, the company's cash flow amounted to RM1.1 billion to RM1.4 billion from 2004 to 2007.

'In terms of profit after tax margin inclusive of government compensation, the Plus business yields a profit margin of above 50 per cent from 2004 to 2008,' it said.

DAP, which first mooted the buy-back idea, feels that because of the strong earnings, the bonds could be repaid by 2015.

However, it is precisely because Plus is such a cash-cow that the government would prefer to keep the status quo, a banker observed.

MCA also questioned the lop-sided terms of agreements awarded to-date, noting that there were several issues that necessitate further deliberations and explanations at the Cabinet level.

Although the government is against privatising the concessionaires, it has found itself in an increasingly difficult position, with road users having to bear the burden of rising costs.

Last month, a decision to hike rates on five major highways was reversed over fears of a public backlash.