Toll hikes no barrier to traffic volume growth

PETALING JAYA (Jan 13, 2014): Traffic volume at most major toll highways in the Klang Valley has been on the rise, suggesting that concessionaires are making money but not enough to stop toll rates from going up this year.
A quick check of the annual reports of the Malaysian Highway Authority showed all major toll highways in the Klang Valley saw higher traffic from 2007 to 2011, proving that motorists continued to use them regardless of the toll rate rise.
During the last major toll rate hike in Jan 1, 2007, the Damansara-Puchong Highway (LDP), which was built at a cost of RM1.5 billion, saw its toll rate rise from RM1 to RM1.60, an increase of 60%.
Besides that, Shah Alam Expressway (Kesas), which was constructed at a cost of RM1.3 billion, increased its toll rate from RM1.50 to RM2.20, a 46.7% hike, but it has since gone down to RM2.
Guthrie Corridor Expressway, which was developed at a cost of RM862 million, saw its toll rate go up 40% to RM1.40, up from RM1.
An analyst said generally any fare increase is a positive factor for toll road concessionaires, provided that there is no alternative route.
"For instance, any toll rate increase in the LDP is definitely a good thing for Litrak and Gamuda. But for the Silk Highway, there are many alternative routes to Kajang. Therefore, should there be any toll rate hike, road users may choose a cheaper way to reach their destination instead of using the Silk Highway," he said.
As for loss-making highway concessionaires, the analyst said this could be due to traffic flow not matching projection. Thus, with or without compensation from the government, these companies will still make losses.
A source involved in the toll concession business told SunBiz that even though it appears that a toll rate hike is good for the concessionaire, it does not mean that all toll road operators would prefer an increase.
"For the toll concessionaires who own good traffic highways, most of them would prefer a toll rate hike instead of getting a stagnant compensation, while for the loss-making toll concessionaires, they would certainly prefer to get compensation over toll rate hike," he said.
However, even with good traffic, the analyst said, some toll concessionaires still hope for a low toll rate because they want more people to use their highways. "This is actually an advantage for them, as a low toll rate will not kill the traffic volume," he said.
Currently, there are at least seven companies listed on Bursa Malaysia that own major highway concessions in Klang Valley, namely Gamuda Bhd, Silk Holdings Bhd, Lingkaran Trans Kota Holdings Bhd (Litrak), IJM Corporation Bhd, Malaysian Resources Corporation Bhd (MRCB), Ekovest Bhd and Taliworks Corporation Bhd, SunBiz picked Gamuda and Silk Holdings, in particular, to study the financial impact of the concession business, as both of these companies operate relatively matured highways with the most traffic volume, and provide more information in their corporate website as well as their latest annual reports.
Gamuda, the largest toll road concessionaire in the country, currently operates three major expressways, all of them in the heart of Klang Valley's growth corridor – Kesas Highway via its 30% stake in Kesas Sdn Bhd, the LDP via its 45% stake in Lingkaran Trans Kota Sdn Bhd (Litrak), as well as the Western Kuala Lumpur Traffic Dispersal System (Sprint) via its 52% stake in Sistem Penyuraian Trafik KL Barat Sdn Bhd (Sprint Holdings).
According to Gamuda's Annual Report 2013, the average weekday tollable traffic of the LDP grew by 3.3% to 497,000 vehicles as at financial year ended July 31, 2013 (FY13), compared to 481,000 vehicles a year ago. Meanwhile, the average weekday tollable traffic on Sprint grew 4.4% to 237,000 vehicles, up from 227,000 vehicles a year ago.
Silk Holdings, via its operating subsidiary Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (SILK), is the concession owner of Kajang Silk Highway, is a primary urban road serving south eastern corridor of the Klang Valley.
For the financial year ended July 31, 2013 (FY13), its highway infrastructure division's revenue increased by 13.6% to RM76.8 million to help reduce its pre-tax loss to RM 16.5 million from RM 19.4 million a year ago.
Traffic volume at Silk Highway remained robust with 62.9 million vehicles, a 13% increase over the total traffic volume of 55.7 million a year before, said Silk Holdings in its 2013 annual report.