PLUS highway bid poser for EPF

By Lee Wei Lian, The Malaysian Insider

KUALA LUMPUR, Oct 7 — MMC Corp’s proposal to buy the UEM Group and its crown jewel, PLUS Highways, which reportedly includes EPF as an investment partner, has raised questions about whether the national pension fund should bid for the highly-prized asset alone.

MMC Corp is the flagship company of billionaire tycoon Tan Sri Syed Mokhtar Al-Bukhary, which currently shoulders a heavy debt burden, making it a potentially risky proposition for EPF should it agree to a joint bid for UEM.

Critics of an MMC-EPF joint bid said that by partnering EPF, MMC will be secured financially as investments by EPF cannot be allowed to fail and it therefore “provides MMC with the government’s backing.”

They add that EPF “should go it alone” without MMC as it brought with it the baggage of high debt gearing.

“If EPF has surplus cash, it should consider buying PLUS Highways as it gives good returns,” said one toll highway industry captain.

Analysts also point out that raising the estimated RM16 billion stated in its proposal to take over UEM would further stretch MMC’s balance sheet.

Syed Mokhtar’s MMC was described as already carrying a heavy debt burden.

Such a fund raising exercise also comes at a time when, as part of the Gamuda-MMC consortium seen to be the frontrunner for the tunnelling works of the upcoming KL MRT, it is expected to seek as much as RM3 billion in bridging loans as well as put in a RM1.8 billion performance bond for the project.

Figures from local research house OSK Research show that MMC’s net gearing stood at an “already high” 271.7 per cent as at end June and its effective financing cost is now some 6.6 per cent versus PLUS’s indicative dividend yield of 4.2 per cent.

Some analysts note market speculation that EPF is looking to acquire PLUS Highways for its good yields, but questioned whether the fund should be in the business of “managing big public assets.”

When approached by reporters on Tuesday over the subject of MMC’s bid for UEM, Khazanah managing director Tan Sri Azman Mokhtar appeared to stress that PLUS Highways was a critical national asset that was currently well-managed and “owned by everyone” by virtue of it being parked under the government’s investment arm.

“There is the status quo option that everyone should consider,” said Azman. “PLUS is a national asset that is well managed.”

He added that a decision “would not take too long” and that the government would look at all aspects of MMC’s proposal.