Ekovest Bhd has sold 40 per cent of its stake in the Duta-Ulu Klang Expressway (DUKE) concessionaire to the Employees Provident Fund (EPF) for RM1.13 billion, The Edge Financial Daily reported today.
In filing the matter with Bursa Malaysia yesterday, Ekovest said that it had agreed, through its wholly-owned subsidiary Nuzen Corp Sdn Bhd, to sell the stake in concessionaire Konsortium Lebuhraya Utara-Timur (KL) Sdn Bhd (Kesturi) to the EPF.
The sale also puts the valuation of Kesthuri at RM2.83 billion, which is almost four times its value just two years ago, with analysts calling it “a good deal for Ekovest”, and “a little on the high side”, according to the business daily.
In 2014, Ekovest had purchased 30 per cent in Kesthuri from Malaysian Resources Corp Bhd (MRCB) for RM228 million cash. This had placed the valuation of the concessionaire at RM760 million at the time.
At the time, the deal with MRCB made it the sole owner of Kesthuri, with Ekovest having acquired the other 70 per cent stake in the concessionaire in 2012, through a RM325.86 million share swap deal.
Ekovest lists its main shareholders as Lim Kang Hoo, who also serves as executive chairman, and Harris Onn Hussein, who is the brother of Umno Vice-President Hishamuddin Hussein.
According to The Edge, one analyst considers the current valuation “a little on the high side” as he expects a fair value of a little over RM1.13 billion for the entire stake in Kesturi.
However, the analyst noted that the valuation for the concessionaire must now take into account DUKE Phase 2, which is scheduled to be ready by the end of this year, and which constituted an investment of about RM1.18 billion by the public-listed company.
“You have to understand that the traffic numbers were very different when they bought it from MRCB and DUKE Phase 2 was not completed back then (2014). There has been a fair bit of capex (capital expenditure) that has been put into Phase 2,” the analyst, who refused to be named, told The Edge.
Taking into account the major investment of RM1.18 billion for DUKE Phase 2, and the RM760 million valuation for the concessionaire in 2014, it could also be said that Kesthuri’s value stood at about RM1.94 billion at the time.
Hence, based on such a valuation, the 40 per cent sale of its stake to EPF now could be seen as giving Ekovest an almost 46 per cent return on investment in a matter of just two years.
“I think it’s a good deal for Ekovest but for the valuation, it has to depend on the traffic forecast numbers,” The Edge quoted TA Securities analyst Ooi Beng Hooi as saying.
According to Ekovest’s filing with Bursa, EPF will make an initial payment of RM921 million in cash to Nuzen.
The balance will be made via two separate payments – RM60 million upon DUKE Phase 2’s certificate of practical completion being issued, and the other RM149 million subject to Nuzen’s fulfilment of the post-completion conditions as agreed between both parties.
The deal will only be finalised after Ekovest shareholders give their approval, the government gives its consent based on its agreement with the concessionaire, and the EPF’s due diligence exercise on Kesturi, The Edge reported.
The 18km-long DUKE highway was opened in 2009, and is currently into its seventh year of a 34-year concession licence from Putrajaya.
With the completion of DUKE Phase 2 later this year, the toll concession period will be extended another 16 years, thus enabling the concessionaire to collect toll until the year 2059.
FMT Reporters Online