MALAYSIA'S MTD WON'T STOP AT TOLL

By Jeffri Mohd Rafiee

KUALA LUMPUR, June 19 (Bernama) -- MTD Group, Malaysia's second largest toll road operator, is busy building new highways both locally and abroad but this does not mean it will not be eyeing to expand into other infrastructure businesses.

Countries in focus, however, remain where the group has already built a
strong foundation and these include the Philippines, Indonesia and Sri Lanka.

President and Chief Executive Officer Azmil Khalid said the group
would not be speading its wings to other places because "we have to complete
what we have first".

The group also would not want to put a strain on its balance sheet and nor
does it have enough people to spare to go elsewhere, he told Bernama in Manila
in conjunction with the ground breaking ceremony for a 50-km extension of the
South Luzon Expressway (SLEX) recently by Filipino President Gloria Macapagal
Arroyo.

MTD Capital Bhd has an 80-per cent equity stake in the highway
concessionaire, South Luzon Tollway Corporation.

In Malaysia, MTD also holds the concession for the Kuala Lumpur-Karak
Highway and its extension, the East-Coast Expressway 1, the East-West Link
Expressway and the Kuala Lumpur-Seremban Expressway. Together, they contribute
about 50 per cent to group earnings.

MTD is also part of the Malaysian-led consortium that was awarded a
30-year highway concession in Andhra Pradesh, India.

Azmil said the group was now working on toll road projects in Indonesia and
China and was in the final stages of negotiating for a similar venture in Sri
Lanka.

In the highway concession business, he said, a longer highway would not
necessarily mean better returns.

"You must go where the traffic is. Sometimes, in shorter distances the
traffic is there. The 60km Kuala Lumpur-Karak is making more money than the
East-Coast Experssway that spans 170km," he said.

He said the group ventured into the Philippines and Indonesia because they
are the biggest two populated countries in this part of the world. So is India
and China.

For Sri Lanka, he said, it would involve building a main expressway from
Colombo to Kandy, the two biggest cities in the country, like Kuala Lumpur to
Ipoh.

"The fact that we have evaluated them and we want to do it means we
are confident with the traffic," he said.

"When you talk about the future, together with our four toll roads in
Malaysia and SLEX, the contribution would probably be 65 per cent or 70 per cent
but, then again, we don't know how much construction can contribute to group
revenue. Construction is also one of our core businesses," Azmil said.

He said, MTD, like any other contractor, would want to bid for every
project but it would not bother bidding for contracts less than RM20 million
(US$6.1 million) or RM30 million (US$9.1 million)in Malaysia.

"For us, overseas markets are more appealing because there is not much for
us to compete in Malaysia. We don't want to compete and kill smaller contractors
who undertake school and police barracks projects," he said.

Construction has been the group's mainstay before it ventured into operating
toll highways.

On the prospects for new highways, he said: "In my personal opinion, there
is no exciting new toll roads in Malaysia."

There was one new expressway in the Klang Valley that recorded 30 to 40 per
cent below the traffic forecast, he said, adding: "There would not be another
North-South Expressway or the East-Coast Expressway."

Prime Minister Najib Razak, when tabling the 10th Malaysia Plan on June 10,
announced that 52 high-impact projects worth RM63 billion ((US$19.1 billion)
have been identified for implementation.

These included seven highway projects costing about RM19 billion.

Azmil said MTD would have to evaluate the 10th Malaysia Plan to see what it
offered the company. For highway projects, he said, it was either a contract
through tender or a concession.

"For a concession, we have to look at its viability. If the internal rate of
return is less than six or seven per cent, no bank is going to touch it," he
said.

He said over the past five years MTD had positioned itself as an
infrastructure development company after the success in feeding its
construction arm through obtaining highway concessions and becoming a property
developer.

"It was a cautious decision by our management. An infrastructure development
company should be involved in buildings ports, independent power plants,
airports and things of that nature.

"But then you have to bring yourself up through a learning curve. So we
started with Sri Lanka," he said, adding that the power plant there had expanded
from the initial 30 megawatts to 50 megawatts and later to 100 megawatts.

With the experience, he said, MTD was now looking at the Philippines.

He said in the port business, MTD started off by becoming a coal port
operator in Indonesia.

"As we build the port, we find it to be easy. Now we have the opportunity
to build a bigger port and, with that experience, we can now go into other areas
and become a port operator," he said.

He said the group also found the coal business to be very exciting
and would in future explore opportunities in this area.

Azmil said the Port of Cigading in Indonesia would begin operations in
October.

Overseas business currently contributed nearly 40 per cent of MTD's group
earnings.
-- BERNAMA