Tak percaya check sendiri

Assuming Capital structure of RM33 billion, for simplicity purposes, FCFF = operating cash flows - capex but BEFORE bond payments and dividends.

Before: 2019: RM2.5 bil FCFF, 2038 RM5.6 bil FCFF
After: 2019: RM1.9 bil FCFF (18% reduction), 2058: RM4.5 bil FCFF (18% reduction)

both have IRR of 9.4%. ie: the toll IRR hasnt changed before and after the reduction.

possible upside due to increased volume, however, government actually still owes PLUS when FHR2 and Bukit Kayu Hitam toll terminated, in the RM200 millions. so its possible that it will be used to pay for this too.

IRR is dependent on cash flow timing. it is all-in (includes capex, opex, excludes borrowing cost, dividends)
you can do it yourself on excel. just straight line it. the number wont run much.

The toll has operating expenses of RM1.3-2.9 bil a year (2019-2036 3%-5% inflation), and capex of RM0.3-0.4 bil a year to maintain the roads.

its not cheap. Toll is a must, or else taxpayers will pay, and EPF will pay.

Thats because they dont allow PLUS to hike the toll

18% toll reduction is worth about 20 years of concession

When the first concession came, the toll rates was such that the toll will hike an average 2%-3% per annum for inflation and to give a modest IRR of 10%.

Since the government does NOT allow for the toll hike, the concession must be extended

18% toll reduction is worth +20 years of concession.
if you dont allow the toll to do the 3% rate hike, than every hike, the concession will be extended by 3-4 years!

IE: if you dont allow PLUS to do their toll rate hike for the sake of votes, than the concession will go practically forever. this is simple maths.

The government should have just let PLUS do their hikes to account for inflation and 10% IRR. Highway is risky, 10% IRR is NOT that high!

20 years extension bro.
more years of cash flow = higher IRR but its offset by the 18% reduction in toll



This post has been edited by Nachiino Etamay: Jan 17 2020, 09:40 AM

ROad tax was used to pay ROsmah bag

dude. ur road tax is just miniscule compared to cost of building highway.

if road tax was fully to fund infrastructure, the cost will be RM10-20 billion highway cost divided by car users, ie: A LOT

Because the capital structure is special
its leveraged more than 20 to 1.

Highways,tolls mechanisms, extension calculation mechanism generally priced via project IRR and not equity IRR. Its up to the equity holders to do funding, but project IRR is the one governed and must be calculated via independent toll CONsultants

When you sell a highway, you need to revalue your debt, equity and recalculate your capital structure.

The last transaction was last decade. so the capital structure is more reflective of now. It was transacted at high-single-digit-IRR which is standard for IRR now.

IRR during that time was 20%, because risk was soo high and loans was expensive. corporates were borrowing at 10%-15% cuz its soo risky.

some =/= all.

if you are the equity, basically if your RM6 bil highway fails, u lose all your money. if traffic below projections, you lose all your money. if no one likes ur highway you lose all your money. your contractor suk and lari? you lose all your money. highway is suky business now. all for an IRR of 9%? jual burger IRR 400% bro

hindsight is 20/20, we in 2020 knows PLUS is a good investment. but the guy who had to build it, knows nothing about future demand for a future road which no one knows about.

this is not EQUITY GUARANTEE.

This post has been edited by Nachiino Etamay: Jan 17 2020, 02:37 PM

you can say its conservative because you are behind 20/20

at the point the decision needs to be made to construct the highway, SOMEONE needs to put half a billion or so equity and risk total capital loss. If his internal IRR is 15%, in 1980, this is worth RM134 billion today at his internal IRR. This is NOT an easy decision. sure. traffic can be higher than expected and get IRR 20%. but the highway can fail and i get nothing due to the insane gearing.

This is what im saying about risk and IRR's.

its only an easy decision in hindsight.

personally, i dont think they are making too much money. they took the risk, they did the project well, they designed the highway well, and they made money

stop thinking making money is songlap. the government could not and would not afford that highway. thats why they tap the capital market. And the capital market demands this returns for risk.

dude. if you gear up by 5x or 6x, your equity returns is 6x geared and more more sensitive to traffic loss

gearing is NOT at risk. this is because all debt for PLUS was guaranteed by the government and taxpayers. Basically, if PLUS failed and the equity goes bancrupt, the government must take-over all debt including government debt. hence, the taxpayers pay for the toll (which should be the case, taxpayers should have made highways, but they dont earn enough)