The Malaysian GE14 (Part 5) – Stocks Impacted by Abolish Highway Tolls

equities ge14 malaysia stocks Aug 13, 2018

by: Tam Ging Wien

Edited by Dean Goh for ProButterfly.


All examples and stocks quoted here in this article and on the ProButterflyTM site are for learning purposes; it does NOT constitute financial advice or a Buy/Sell recommendation. Contents are reflective of personal views and readers are responsible for their own investments and are advised to perform their own independent due diligence and take into account their own financial situation. If in any doubt about the investment action you should take, you should consult a professional certified financial advisor.

The "Malaysian General Elections (GE14) – An Investors Perspective" series is intended to discuss and generate investment themes and ideas, but it should NOT be misconstrued or otherwise interpreted as financial advice.


In our previous articles in this series, we covered a summary of the major points of the new Pakatan Harapan government manifesto.

In summary, the Pakatan Harapan (PH) has campaigned with a very clear message of hope for the people of Malaysia in their manifesto entitled Rebuilding Our Nation Fulfilling Our Hopes. The manifesto sets out the following pledge:

  • Fulfil 10 promises within 100 days
  • Fulfil 60 promises across 5 major pillars within 5 years
  • Fulfil 5 special commitments to specific groups including the FELDA Settlers, The Indian Community, Women, Youths and Senior Citizens

The manifesto sets out the following promises that the new government intends to fulfil within the first 100 days of taking office:

  1. Abolish the GST and take steps to reduce cost of living.
  2. Stabilise the price of petrol and introduce targeted petrol subsidies.
  3. Abolish unnecessary debts that have been imposed on FELDA settlers.
  4. Introduce EPF contribution for housewives
  5. Equalise the minimum wage nationally and start the processes to increase the minimum wage.
  6. Postpone the repayment of PTPTN to all graduates whose salaries are below RM4,000 per month and abolish the blacklisting policy.
  7. Set up Royal Commissions of Inquiry on 1MDB, FELDA, MARA and Tabung Haji, and to reform the governance of these bodies.
  8. Set up a Special Cabinet Committee to properly enforce the Malaysia Agreement 1963.
  9. Introduce Skim Peduli Sihat with RM500 worth of funding for the B40 group for basic treatments in registered private clinics.
  10. Initiate a comprehensive review of all megaprojects that have been awarded to foreign countries.

In addition to the 10 promises within 100 days, there are also 5 major pillars of reforms that the PH government promises to achieve within the next 5 years:

  • Pillar 1: Reduce the People’s Burden
  • Pillar 2: Institutional and Political Reform
  • Pillar 3: Spur Sustainable and Equitable Economic Growth
  • Pillar 4: Return Sabah and Sarawak to the Status Accorded By the Malaysian Agreement 1963
  • Pillar 5: Create A Malaysia That is Inclusive, Moderate and Respected Globally

Taking the 10 promises and 5 key pillars at face value and assume that the new PH government will see through its promises and implement them in the most efficient and practical way.

We we 6 major (non-exhaustive) groups of stocks which will be impacted as a result of the implementation of the PH Manifesto:

  1. Leadership Change – Potential Impact on Businesses with Government Monopolies, Ownerships, Relationships and Favours
  2. Megaprojects Review – Potential Implications on Development and Construction related Stocks
  3. GST Removal – Potential Implications for Consumer Stocks
  4. Abolish Highway Tolls – Potential Implications on Toll Operators
  5. Reduction of Excise Duties on Imported Vehicles – Potential Implications on Vehicle Importers and Retailers
  6. Impact on the Ringgit – Potential Implications on Import and Export Driven Businesses

This week, we will cover stocks in Group 4 which could potentially be impact by the Abolish Highway Tolls.

Abolish Highway Tolls – Potential Implications on Toll Operators

Under Promise 6 of the PH manifesto, the new PH government has vowed to abolish tolls as they view these as unfair monopolies and concessions. The PLUS and MAJU Holdings concession were specifically singled out in the manifesto as examples of BN concessions to these private enterprises resulting in oppressive prices of tolls.

According to the details in PH’s manifesto, they will over the course of their term in office, review all highway concession agreements and renegotiate them to obtain the best value for money for the citizens with the ultimate aim of taking over and abolishing the tolls gradually.

Maju Holdings was the concessionaire to build and operate the Maju Expressway (MEX) that links MEX links Kuala Lumpur with Cyberjaya and Putrajaya.

PLUS Expressway Bhd is the largest highway concessionaries or build–operate–transfer (BOT) operator company in Malaysia. Among its flagship highways are the North-South Expressway and the Malaysia-Singapore Second Link Expressway. It is also a substantial shareholder in the electronic toll collection systems in Malaysia including the Touch ‘n’ Go and Smart TAG systems. PLUS is a member of the UEM Group Bhd, a developer and construction firm wholly owned by Khazanah Nasional Bhd which is the sovereign wealth fund of the Government of Malaysia.

Both Maju Holdings and PLUS are currently privately owned and not traded on the Bursa Malaysia stock exchange.

However, another company Lingkaran Trans Kota Holdings Bhd (LITRAK),also a highway concessionaire and significantly owned by Gamuda Bhd (GAMUDA), is publicly traded. LITRAK was the builder and operator of the Damansara–Puchong Expressway (LDP) and Sprint Expressway. The LDP links the major townships of Damansara and Puchong while the Sprint highway is one of the major arteries and busiest expressways in the Klang Valley.

Both companies had their stock prices hammered severely after the elections but has sense recovered somewhat over the last few weeks. The PH Government promised a fair compensation to the affected companies including LITRAK. At this moment, there are scant details with regards to how companies will be compensated and markets are in general dissatisfaction.

Perhaps the recent sell-down was overdone?


Source: Yahoo Finance

 Source: Yahoo Finance

Interestingly, just a short time after this post had gone live, the Malaysian government announced that it has decided to defer toll abolishment until the country's fiscal position improves. Following news, LITRAK's stock price jumped to a high of RM5.90 at 9am on Tuesday morning (14-Aug-2018). More information can be found in the link below:-

 

We will be watching the political developments in Malaysia very closely over the coming weeks. We are thrilled that the super luxury yacht - The Equanimity is now in possession of the Malaysian government. The yacht estimated to be valued at about RM1 billion was believed to be purchased using funds from the state fund 1Malaysia Development Berhad (1MDB):

In our previous articles on the Malaysian GE14, we discussed the results of the election and the immediate impact on the markets as well as the potential stocks directly impacted by the leadership changereview of the megaprojects and the removal of GST. Do catch this article if you haven't done so!

Be sure to follow us to learn more about the profile of Malaysian listed stocks!

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