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PETALING JAYA: The proposal to dispose of Gamuda Bhd’s four urban highway assets to a non-profit private company – Amanat Lebuhraya Rakyat Bhd (ALR) – for RM5.5bil is an opportunity for the former to unlock value, while its shareholders could be rewarded by a special dividend distribution.
Based on Gamuda’s respective stakes in the four highways, it will be receiving a total of RM2.3bil in proceeds from this sale, with RM1bil recognised as one-off gains.
According to research firms, management of the infrastructure and property development company had indicated that the proceeds will be used to reward shareholders, reinvestment and to reduce borrowings.
Besides this, the group had also indicated that it was currently looking at concessions in the green or renewable energy space to rebuild a sustainable recurring income.
Post-toll sale, the group will also turn into a net cash company with net cash of RM600mil, from the net debt of RM1.7bil as at the second quarter of financial year 2022 (FY22)
On Monday, Gamuda received a conditional offer letter from ALR to acquire four tolled highways, namely, Kesas Sdn Bhd; Sistem Penyuraian Trafik KL Barat Sdn Bhd (Sprint); Lingkaran Trans Kota Sdn Bhd (Litrak); and Syarikat Mengurus Air Banjir dan Terowong Sdn Bhd (Smart), at an enterprise value of RM5.48bil.
Gamuda owns 70% in Kesas highway, 43.2% in Litrak, 20% in Sprint and 50% in Smart.
“The flip side to this highway deal is that Gamuda will have to forgo around 20% to 35% of the FY22-FY24 forecast recurring net profit (circa RM170mil per annum) from its highway assets.
“However, the highway divestment will further enhance Gamuda’s war chest and provide sufficient headroom to redeploy capital to either the underground portion of the RM31bil mass rapid transit (MRT) 3 Circle Line project where tenders are to be called in May; the RM5bil Penang South Islands (PSI) project which is targeted for approvals in the second half of 2022, or other private finance initiative (PFI) proposals,” said CGS-CIMB Research.
The research firm said that assuming 10% to 30% of the RM2.3bil cash proceeds were earmarked for a potential special dividend, it could range from 18 sen to up to 27 sen per share, translating to a 5.2% to 7.9% yield.
Meanwhile, Kenanga Research said that the RM2.3bil was higher than its estimated valuation of RM2.1bil for the tolled highways. It believes that the deal would likely go through, unlike the 2019 deal offered by the Finance Ministry (MoF) then, which faced a backlash.
This is because the government is not a party to this transaction unlike the previous deal in which they were required to provide government guarantees.
“Also, this deal saves the government RM4.3bil worth of toll compensations required for the rest of these four concessions, and the public gets to enjoy flat toll charges throughout the tolls’ remaining tenure,” it added.
Based on a 1.7% traffic volume on a compound annual growth rate, analysts noted that the concessions’ and ALR’s debts are expected to be fully repaid by mid-2032.
This means an early end to both Sprint and Smart concessions from their existing end dates and below four years of concession extension for Kesas, with a below two-year extension for the Lebuhraya Damansara-Puchong (LDP) highway.
In comparison, the MoF’s offer in 2019 had implied an unspecified end of the tolling dates, an analyst added.
Shares in Gamuda closed eight sen higher to RM3.57, while Litrak jumped 52 sen to RM4.55 yesterday.
In a report, MIDF Research believes that Litrak investors “should accept the offer as an exit strategy, given the lack of catalysts for LDP and Sprint”.
It said the average weekday tollable traffic for these highways has been on a downtrend in the past few years due to the increase in the ridership of public transportation, especially the light rail transit and the MRT.