Corporate: Grand Saga seeks compensation
By Siow Chen Ming
Grand Saga Sdn Bhd, the concessionaire for the Cheras-Kajang highway, is to negotiate with the government for compensation due to a soon-to-be completed access road, say sources.
The company is gauging the impact of the access road on its traffic flow and is preparing its case for presentation to the government. The Cheras-Kajang highway concession, like other toll concessions, includes a provision whereby the concessionaire is adequately compensated if an access road is built that connects to it.
Lion Diversified Holdings Bhd is building an access road connecting its Mahkota Cheras township to the Cheras-Kajang highway. This will allow commuters to enter and exit the township without having to pass through Grand Saga's toll plaza at the 11th mile of the highway. The access road will also benefit residents in the nearby Sungai Long township developed by SHL Consolidated Bhd.
"The access road is scheduled for completion in a couple of months. After that, it will be handed over to the Kajang Municipal Council. This effectively means that the issue of compensation would have to be dealt with between Grand Saga and the government, not with the Lion group," says a source.
It is likely the access road will not be opened until the outcome of the negotiations between Grand Saga and the government, a process which may take some time. However, it is only a matter of time as the Mahkota Cheras and Sg Long townships, which cover more than 1,500 acres, now share only one entry/exit to the Cheras-Kajang highway.
Grand Saga's official did not respond to a request for comment.
When the access road is opened, it will have an impact on Grand Plaza's toll collection at the 11th mile, but not on the first toll located at the 9th mile of the highway, an analyst from Rating Agency Malaysia (RAM) says.
There are two tolls on the 11.5km Cheras-Kajang highway. Current toll rates (for private passenger cars) are 70 sen at the 9th-mile toll plaza and 60 sen at the 11th-mile toll plaza. Revenue collection from the two toll plazas are currently about equal.
The highway was built at a cost of RM275 million in late 1998 and commenced tolling in 1999. Grand Saga issued RM210 million in bonds to build the highway. Besides the bond issue, it received a RM59 million support-loan from the government.
But that wasn't all. The government had subsequently compensated Grand Saga for revising scheduled toll rate hikes.
Due to the revised toll rate structure, the government in 2002 extended the Cheras-Kajang highway concession by two years to Sept 18, 2027. Then, in 2003-2004, the government paid RM104.93 million in compensation, apart from waiving interest and repayment on the support loan of RM59 million drawn down by Grand Saga in 1997 to finance the project, according to RAM.
Any further compensation may increase the government's total compensation for the highway to more than RM163.93 million, which would be highly ironic, considering the construction cost was only RM275 million.
The highway has been a profitable concern. Grand Saga registered a revenue of RM57.84 million for the financial year ended Dec 31, 2004, with a net profit of RM6.47 million. This was sharply lower than FY2003's revenue of RM68.56 million and net profit of RM27.61 million, as Grand Saga recognised a portion of the government's compensation in its income statement in FY2003. Despite a drop in earnings, traffic volume surged by 4% between 2003 and 2004, with average daily traffic of 187,000 vehicles registered in FY2004.
Toll collections from the Cheras-Kajang highway have expanded over the last seven years. In FY1999, the first year of tolling, revenue was RM22.55 million and net profit was RM9.23 million. In FY2000, revenue and net profit was RM26.8 million and RM6.05 million, respectively. In FY2001 and FY2002, revenue was RM29.05 million and RM30.84 million, respectively, while net profit was RM12.05 million and RM10.62 million in the respective years.
According to filings to the Companies Commission, Grand Saga is 44.45% owned by Peak Synergy Sdn Bhd, Europlex Consortium Sdn Bhd (33.33%) and Cerah Sama Sdn Bhd (22.22%). The late Datuk Lim Ah Bak, Ahmad Ishak Haron and Minhat Mion were listed as substantial shareholders of the three holding companies.
There was an attempt by the above shareholders to inject Grand Saga into Malaysian Tobacco Co Bhd (now Measat Global Bhd) in 2000, but it did not materialise.
It is worth noting that the Selangor government-listed infrastructure arm Kumpulan Perangsang Selangor Bhd had a 42% stake in Grand Saga in earlier years. KPS is believed to have sold its interest in Grand Saga in 1999/2000, before it was listed in 2003.