Causeway toll bonanza for MRCB in the offing (updated)

UPDATED While the rakyat suffer from Barang Semua Naik, another well-connected company has hit the jackpot with this get-rich-quick scheme. How do they come up with these “brainwaves”… Well, as they say, make hay while the sun shines – for it may not be shining much longer for the BN. Instead of investing in public transport at a time of rising fuel costs, they can only think of tolls, tolls and more tolls for more and more highways and bridges serving more and more private motor vehicles. (Think also of the second Penang bridge, which will now cost at least RM5 billion, following the fuel price hike, from RM2.7 billion a year ago.)

This report from the Singapore Straits Times. Great work, Leslie, for exposing this:

June 19, 2008
S’pore cars using Causeway may have to help fund new JB road
Contract says toll will be levied on vehicles entering Malaysia to pay for new link to North-South highway

By Leslie Lopez, South-east Asia Correspondent

KUALA LUMPUR – THE Malaysian government has awarded a RM1.2 billion (S$500 million) contract for a road on the fringes of Johor Baru to a conglomerate linked to the ruling Umno party, a project analysts say will surely attract close scrutiny because it will be funded by sharply taxing vehicles using the Causeway linking Malaysia and Singapore.

Documents reviewed by The Straits Times show that publicly listed MRCB secured the government project in June last year to build an 8km partially elevated expressway linking the Customs, Immigration and Quarantine Complex (CIQ) at the Causeway with the southernmost end of the North-South Expressway.

The contract, which its promoters say will alleviate congestion in Johor Baru city, also features a potentially controversial 34-year toll concession for MRCB, a diversified investment holding company that has interests in property development, infrastructure and engineering services.

Under the contract awarded, tolls would not be levied for users of the proposed dual three-lane carriageway, but rather on all vehicles crossing into Malaysia from the Causeway.

A senior MRCB executive who confirmed the project awarded by the government told The Straits Times that toll collection will begin once the expressway is completed sometime in late 2011.

Based on information contained in an advisory to potential investors for the project, the toll charges will range from RM6.20 for passenger vehicles entering Malaysia to RM12.40 for lorries.

The rates will be raised every three years, and will peak at RM14.60 for passenger vehicles and RM29.20 for lorries, the documents showed.

Currently, vehicles using the Causeway pay a nominal fee. Passenger vehicles entering Malaysia are charged a toll of RM2.90, and lorries, RM5.50. The Singapore Government imposes a charge of S$1.20 for passenger vehicles and S$2.60 for lorries.

The proposal to impose new toll charges in Johor will hit Singaporeans the most.

The document on the bond issue prepared by MRCB bankers stated that the Causeway currently serves ’69 million person trips annually, which is significant compared to the 20 million passengers at the Kuala Lumpur International Airport’.

The document issued by CIMB Investment Bank and HSBC Malaysia also stated that about 75 per cent of the passenger cars crossing the Causeway are Singapore-registered vehicles.

It is not clear whether Malaysia’s plan to impose toll charges on the Causeway would provoke a similar reaction from Singapore.

But in February, Singapore raised rates at the Second Link, which a Land Transport Authority spokesman said were ‘pegged to those set by Malaysia’.

The Causeway and the Second Link, which connects Tuas and Johor’s Gelang Patah, are the two land links between Malaysia and Singapore.

The 1,056m Causeway is the preferred route because it takes vehicles directly into Johor Baru, and the toll charges there are lower compared with those at the Second Link.

The heavy traffic is a major cause of congestion in Johor Baru.

But the huge cost of the new elevated expressway to alleviate the situation is raising eyebrows.

At a price tag of RM1.2 billion, it will cost roughly RM150 million per kilometre to build, according to bankers and analysts.

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Now, the largest single shareholder in MRCB is the EPF, which owns a 30 per cent stake in MRCB. The EPF acquired a 20 per cent stake in MRCB in 2005 from Realmild, as settlement of a RM500 million loan due by Realmild to the EPF, according to The Edge. So is the Johor highway contract an attempt to ease the EPF’s pain over the acquisition of MRCB shares? (The last time the MRCB paid out any dividends was a paltry 1.2 sen in 1998.) Or is MRCB just a convenient vehicle to get jobs for the boys?

This from The Edge Daily:

14-01-2005: EPF, Realmild in MRCB poser

The Employees Provident Fund (EPF) has been urged to be more transparent in its decision to accept cash and shares in Malaysian Resources Corp Bhd (MRCB) and Media Prima Bhd as full settlement of a RM500 million loan owing to it by Realmild (M) Sdn Bhd.

Analysts and the Malaysian Trades Union Congress (MTUC) want the EPF to reveal to the public whether it had to take a haircut under the settlement scheme.

EPF tells FinancialDaily that the settlement was for debts totalling RM500 million, but does not reveal the amount that was paid in cash. Realmild had taken the loan in 1996 to finance the purchase of additional shares in MRCB.

As part settlement, the EPF announced on Jan 7 that it had received a 20.24% stake comprising 155.55 million shares in MRCB, increasing its stake to 32.5% comprising 235.26 million shares. It also received 21.06 million shares in Media Prima, increasing its shareholding to 14.9% or 80.48 million shares.

Based on the market price of MRCB and Media Prima of 78 sen and RM1.74 respectively on Jan 7, the settlement shares would be worh a total of about RM158 million.

That means Realmild would have to fork out RM342 million in cash to settle the entire amount.
Hence, questions over the fair valuation of the shares and the exact quantum of the cash paid out by Realmild have cropped up.

MTUC president Syed Shahir Syed Mohamud tells FinancialDaily that the EPF should always look into the contributors’ interest when making investments as the amount involved the contributors’ hard-earned money.

“The investments must be prudent and the returns must be more significant than what the EPF had invested,” he said.

EPF, in its reply to FinancialDaily , says the deal was a culmination of several proposals, counter proposals and negotiations.

“Both parties want to resolve the repayment issue as soon as possible, and it is in this spirit that the negotiations were first entered into. We are happy with this repayment scheme as it allows for a satisfactory resolution to Realmild’s loan,” it says.

The EPF says its presence on the MRCB board will ensure its investments are protected and that the two companies are focussed on creating shareholder value. It says there will be no management changes.

Most analysts are not excited about the prospects for MRCB, which also holds a 24.9% stake in UDA Holdings Bhd, which is involved in property development and investment, hospitality and retail.

A research house says it is not excited about MRCB’s earnings outlook even though MRCB’s share price is trading at a steep 44% discount to its revised net asset value of RM1.36 per share.

A senior analyst says property stocks have generally under performed the market while MRCB’s share price is weighed down by about RM1.14 billion in borrowings.

However, a Mayban Securities Research analyst is more positive about MRCB given its good growth prospects, underpinned by the 24.9% UDA stake, construction order book of RM1.2 billion and the RM4 billion KL Sentral development. MRCB also owns the 2,000ha Bandar Seri Iskandar township project in Perak.

“The acquisition is a win-win situation and will have a long-term positive impact on MRCB. We believe the EPF sees value in MRCB’s stake in UDA, which owns about 1,000 acres of urban landbank in Kuala Lumpur, which is ripe for development,” said Mayban Research.

It says the KL Sentral development should provide MRCB with a stable stream of property earnings until 2010.

“The coming-on-board of the new shareholder may provide MRCB with the necessary financial support for the group to embark more aggressively on its property development activities,” it adds.