Tuesday, March 06, 2007

"Excessive Profits"

We have always been griping that the Government compensates the toll concessionaires too much, or the toll rates are set at unreasonably high levels. But no one is really in the know as to how much these toll concessionaires make in terms of profits, not exactly anyway, even though many of these companies are listed entities.

So when I got my hands on a copy of the Lebuhraya Damansara-Puchong (LDP) concessionaire, Litrak's stock exchange listing prospectus issued in November 1996, I (figuratively) fell off my chair.

Here's a little background about listing prospectuses. They are issued firstly not only as information with regards to the prospective company, but also a document to protect investors from unscrupulous businessmen. That means that all information contained in the prospectus must be fair and true, with all statements and forward projections verified and validated by lawyers, accountants, market researchers as well as regulators. Non-compliance or provision of information found to misleading or untrue will land the various parties, including the directors of the company itself into hot soup.

Within the prospectus itself, there is no other piece of information more important than earnings projections, for it is the key benchmark by which investors can make reasonable evaluation on the worth of the company. Companies seeking listings without earnings certainty, need not make such forecasts or projections. Hence, when Litrak made their 30 year earnings projection based on their LDP concession agreement, you can be certain that it was almost as good as gold.

Well, lets get to the juicy details:

Cost of building LDP: RM1.327 billion
The total capital cost of construction of the Highway is currently estimated at RM1.327 billion inclusive of capitalised interest of RM142.3 million.
Projected Profit after Tax (PAT) over 30 year concession period: RM18.865 billion
Projected PAT 1997-2006: RM1.222 billion
Projected PAT 2007-2015: RM3.826 billion
Projected PAT 2016-2029: RM13.817 billion
Yes, you've read it right. Over a short period of 30 years, Litrak is practically guarateed of RM18.7 billion profits, relative to an initial cost of RM1.3 billion. That's more than 14.2 times return on capital. The LDP concession agreement signed by our elected Barisan Nasional government virtually guaranteed “excessive profits at the public's expense”.

Even if the Government had funded the construction of LDP by issuing generous high yielding treasury bonds at 5% rate, the overall cost of construction taking into account interests payable would only have amounted to no more than RM5.75 billion.

More than RM10 billion of our hard-earned tax payers' monies are literally siphoned off for the benefit of the few politically connected. There was no open or competitive tenders made for the concession rights..

And this is only for a single highway project. Can you imagine the cumulative impact of the tens of highway concessions in this country? Is it "excessive (guaranteed) profits"? You decide.


Anonymous said...

18.865 lah.. wrongly added... :-)

Golf Afflicted said...

Thanks Anon. Wrongly added due to too many late nights ;)

I've amended the numbers, but I believe the argument stands.


Anonymous said...

That's one hell of a ROC albeit a projected one.

Becos you did not write on how and from where this projected returns will be derived from - i am not sure about your "guaranteed" profits statement.

Are you saying that in the contract itself the government actually promised the concessionaires something - like guaranteed toll increases whether or not the concessionaires company is making money or not?

And if the contract is really "unfair" isnt there a way the citizens or any NGOs/political party(who is the affected party) could seek redress based on the Law of Contract? or any other applicable consumer/civil law?

What is DAP plan on this issue?

zewt said...

yeah, what is DAP action on this?

as for us... we will do our part to tell ppl about this news.

Golf Afflicted said...

Basically, Litrak has no other source of revenue, hence all projections (which are verified by the professionals) are derived essentially from the concession agreement).

These projections could not have been made if the concession agreement does not justify the revenue numbers.

As for what DAP does, what do you suggest we do. We have had a press conference on it, but it was obviously not written up, especially in the English press...

Your suggestions are most welcome ;)



Anonymous said...

Hit the road, Jack!!
No more! No more!No more!

Hit the road, Jack!

Do something DAP!!
Do something DAP!

Anonymous said...

Hi Tony

I would like to know where you stand on the issue of a pension fund investing in a bank....

Anonymous said...

Overhead "Chinese tycoons said",
"Not much lah, considering we just have to tambah" the extra % for "political cronies consumption",
we just tambah" lah.
Anyway, rakyats pay,
that is how the businesses are run down here."

Anonymous said...

An average 5,000 voters composes a parlimentary seat in kampong areas =
While a city area of 20,000 voters get one.
It is manipulated in such that the regime stays, likely forever.

Silent Me Not AUthor 1 said...


I suggest DAP stop making just purely press statements, but make a shadow cabinet of the existing government. THerefore, DAP should be able to provide alternative solutions rather than just objection.

Anonymous said...

Dear Tony, in my opinion, if you want DAP to gain more votes ( especially from Malays and Indians), you should recruit some Malay and Indian candidates and form a truly multi-racial DAP party that unites the people. After this, then tell people what can you deliver if you win the election - e.g., revamp the ACA, fight corruption and send the corrupted UMNO cronies to jail, education reform, better economy policy, better health care, etc. People want to know what can you do for them before they cast their vote. If this is not done, the Malays and Indians will always perceive that DAP is only meant for the Chinese community. I really can't wait to vote out the current BN government headed by the most corrupted and hypocrite Pak Lah. Good luck brother!

Anonymous said...

Dear Tony, another thing you can do it to list down all the blunders and wrongdoings committed by the current government (e.g., not prosecuting Zakaria, spending billion on a stupid astronaut, singing dirty highway contracts that suck the blood of poor people, covering up of corruption by senior politicians, etc) and tell these to the voters before the election. Don't let the voters be pacified by pre-election 'sweetener' from BN. Let the people know that BN, especially Pak Lah has been giving them empty promises and make the country even more backward.

Anonymous said...

Mind you Tony,
I know of many Malays who support DAP.
Lots of middle class and professional Malays...

Ask KIT to look into it...

Anonymous said...

Tony, you should also list down the profits that the Company have made. Based on fillings with Bursa Malaysia, the profit after tax since 2000 are as follows:

All numbers in millions:

2000 - RM70.014
2001 - RM80.757
2002 - RM101.962
2003 - RM52.220
2004 - RM89.044
2005 - RM55.881
2006 - RM79.738

Total - RM529.616

I don't have the numbers before 2000. However a search with the ROC will reveal those numbers. However, the net cashflow of the company shows a different picture which is what the Company is using to justify an increase:

2000 - RM17.273
2001 - (RM199.958)
2002 - RM12.213
2003 - (RM40.625)
2004 - RM11.803
2005 - (RM72.718)
2006 - RM5.649

Total - (RM266,363)

See, eventhough the Company made RM79 million in 2006, the net cashflow was only RM5.6 millin which is hardly enough to pay for operating cost. Most people would believe that.

However, as the toll concession period goes on, the capital repayment will be less and the net cashflows will be higher.

At the end, the net profits is equal to the net cashflow. Else, the Accounts will not "balance"

Right Tony?


Anonymous said...

I think AAB and TP failed their maths and statistics!!


Anonymous said...

According to Wikepedia (http://en.wikipedia.org/wiki/Abdullah_Ahmad_Badawi), our sleeply Prime Minister cum Finance Minister indeed failed his statistics paper: "He received a Bachelor of Arts in Islamic Studies from the University of Malaya in 1964, having originally wished to pursue a degree in Economics but failing to meet the required standard after failing his statistics paper."...does it mean that the country economy is at stake? :-P

Anonymous said...

There's a MT bloggers' meet tomorrow evening. Maybe one of your DAP guys should attend.

Anonymous said...

I suggest that the Opposition should launch their election manifesto soon with the following as some of the platform:

*Implement IPCMC

*Review of the NS Scheme

*Setting up of a Judicial Commission to appoint judges

*More definitive actions to combat corruption like bringing the some of the 18 prominent cases to court within six months of an election victory

*Have the ACA report to Parliament

*Amend laws that allow for detention without a judicial review within 6 months

*Provide programs that help ALL poor Malaysians improve their lot.

The manifesto should not be too long and easy for the common folks to understand and accept.

HJ Angus

Anonymous said...

Haji Angus ???

Anonymous said...

Saya nak naik tol, saya punya suka lah... You tak suka kalu, boleh guna jalan alternatif...

Yang Menurut Perintah,
Suma Wai Loo

Anonymous said...

Suma Wai Loo... Kamu memang BUTA DUIT!! terima Duit HARAM!!

Jalan Alternatif juga kena bayar toll!! Mana jalan yang tak ada toll?

Anonymous said...

Cashflow of the company showing negative is very simple to generate.

All you need is a good team of accountant that convert all the profits into expenses or assets and declare a loss.

The money goes to Directors, Shareholders, Underground politician pockets... etc etc...

Everyone in Business or study accounts knows that very well.

Everyday millions of car pass through toll.

my daily toll payment are Minimum RM3.2 to more than RM10 per day as I travel around Klang Valley to my customer area.

It is impossible for the toll company to made loss.