PLUS Expressways: Buy, target price RM4.13

ECM Libra Investment Research has raised PLUS Expressway's (5052) target price by 4 per cent to RM4.13 (from RM3.98) after it agreed to sell its stake in Indonesian highway company PT Cimanggis Cibitung Tollways (CCTW) to PT Bakrie & Brothers Tbk. 
 
"While the sum invested in the project is not alarming as the concession agreement has yet to be executed with no works been carried out, we are happy to note that PLUS is able to recoup its investment and withdraw itself from the project unscathed," said ECM Libra in its report this week.

CCTW was announced as the winning bidder for the Cimanggis-Cibitung toll road project in September 2007. PLUS had the biggest stake in the joint venture with 60 per cent, followed by PT Capitalinc Investment Tbk with a 25 per cent stake and Bakrie with 15 per cent.

The Cimanggis-Cibitung toll road is a 25.4km stretch that forms part of the Jakarta Outer Ring Road 2. With an initial concession period of 35 years, the project has seen some hurdles with the negotiations of the terms of the concession agreement such as land cost capping as well as toll rates.

"We make no changes to our earnings estimates as gain from the disposal is negligible and no contributions from the Cimanggis-Cibitung toll road have been imputed.