Monday, September 25, 2017

Is UEM Edgenta sweating?

Today, The Star came out with the news that UEM Edgenta is looking at a longer term contract between UEM Edgenta and PLUS. I wonder why suddenly...

We also have read of news that there is a proposed acquisition by Abu Sahid to acquire PLUS at a price of RM36 billion. I am also wondering whether there is a possibility of savings in the maintenance of PLUS highway considering that the proposed acquisition is quite bold at a price higher than when UEM and EPF did a buyout of the highway back in 2011. At that time, the Enterprise Value (cash plus debt) paid for PLUS was RM34 billion. And one can imagine, for a concession that has enjoyed about 6+ years of revenue, another party would come and propose for an acquisition at a higher price considering that the concession period is now reduced.

The below is the filing made during Faber's acquisition of PROPEL in 2014. We now know that the icing in the cake for UEM and UEM Edgenta is Edgenta Propel (formerly PROPEL), the maintenance outfit for PLUS highway.

I can only imagine that if ever this very hard to maneuver deal is pulled through, contract between PLUS and Edgenta may not continue. Hence, I can also imagine that another sweet side of the cake besides the highway revenue is the maintenance contract.