Media Press Release

Investors are keen to see what is likely to be the toll concessionaire's dividend policy. Meanwhile, they may get a pleasant surprise in another form, writes JOSE BARROCK.

TOLL road concessionaire MTD Infraperdana Bhd is planning a capital repayment exercise of about 20 sen per share. This will be undertaken with a view to improving the company's capital structure.

BizWeek was told that officials from MTD Infraperdana have already obtained term-loan facilities from several financial institutions for some RM500mil to facilitate the capital distribution exercise, which should come as a sweet surprise to shareholders.

A source says the loan will be used for the capital repayment exercise as well as to settle debts which MTD Infraperdana had incurred when it acquired toll road operator Metramac Corp Sdn Bhd from its sister company Metacorp Bhd. The remainder will be utilized as working capital.

"MTD Infraperdana is looking to capitalize on the low interest rates, and has managed to secure financing at an interest rate of only slightly more than 5%. The company has pounced on this opportunity and is capitalizing on the cheap source of funding to reward shareholders," says a source close to the company.

With some 1.15bil shares, MTD Infraperdana will pay out some RM230mil to shareholders, and reduce the par value of its shares to 60 sen, from the current 80 sen.

The source adds that with strong cash flow and the promise of attractive earnings in the near term, MTD Infraperdana had little difficulty obtaining borrowings to fund the capital repayment exercise. For the cumulative three financial quarters ended December last year, MTD Infraperdana's net cashflow from operating activities was some RM105.6mil.

With a hike in the toll rates at the KL Karak Highway (which MTD Infraperdana operates) scheduled for 2007, and the first phase of the East Coast Expressways (ECE1) earnings expected to stream in, analysts are expecting an earnings boost for the group.

Dividend policy

It is further believed that MTD Infraperdana will declare a dividend pay out for the financial year ended March 2005, which will set the tone that the company is keen to adopt a strong dividend policy going forward.

"As you can appreciate, at this point, that plan is rather fluid. But even if the company does not pay dividends at this juncture, the company does want to articulate a dividend policy. Going forward, we expect MTD Infraperdana to pay out as much as 50% of its profits as dividends. The company has waited, seen the profit numbers from ECE1 and Metramac, and is deciding on when to initiate the dividend payout," the source adds.

A local research house has forecast that MTD Infraperdana will pay out as much as 6 sen for its financial year (FY) ending March 2006.

This, the research house says, works out to an impressive yield of about 6.6%.

For the nine months ended December 2004, MTD Infraperdana posted a net profit of RM19.94mil on the back of RM77.4mil in sales.

In its notes accompanying its financial announcement, MTD Infraperdana quite plainly states, "The Group expects current year performance to remain favourable. The opening of the ECE 1 has generated additional traffic at KL Karak Highway over and above the normal traffic growth."

Reuters Estimates forecasts MTD Infraperdana posting a net profit of RM35mil from RM116mil sales for FY05.

According to sources familiar with MTD Infraperdana, the company is likely to double its revenue and profits in the next financial year, largely as a result of the toll road operations at the ECE 1, and the recent acquisition of Metramac Corp Sdn Bhd.

At present, the ECE1 has a traffic volume of about 9,000 passenger car units per kilometer per day, which is in line with estimates and a 50% hike from the volume of vehicles in September last year.

"The route (ECE1) is a monopolistic route to the East coast. It shaves off some two hours from the existing trunk road, so it is bound to bode well for MTD Infraperdana," an analyst says.

Metramac has the concession to toll road operations at the Sungai Besi Expressway and the East West Link. According to the research outfit, the two highways could contribute as much as RM12mil to RM14mil in net profits for MTD Infraperdana in FY06.

MTD Infraperdana had proposed to acquire Metramac from its sister company Metacorp for some RM245mil in December last year. To date some RM220mil is still due for payment to Metacorp for the toll road concessionaire Metramac.

Interest picking up?

Since early April, MTD Infraperdana's shares have gained by as much as 11.6%. The company's shares hit its 52-week high of 94 sen recently on May 16 with some 3.9 million shares traded. MTD Infraperdana closed at 87 sen on Thursday.

Although only sparsely covered by analysts, the two research houses that track the company have a buy call on it.

A local bank backed house says, "MTD Infraperdana still trades at a significant discount to our discounted cash flow value of RM1.20 per share… The potential capital distribution by MTD Infraperdana is another carrot."

Another plus point for MTD Infraperdana is its affiliates construction company MTD Capital Bhd.

MTD Infraperdana is the toll-road operating arm of MTD Capital which has interests in property development, waste management and cement manufacturing among others.

MTD Capital, as at early May this year, controlled as much as 73.3% of MTD Infraperdana. Other substantial shareholders of MTD Infraperdana include the Employees Provident Fund with 7.2% interest in the company.