MMC doing due diligence on KTMB

MMC Corp, controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, plans to pump in as much as RM1 billion to take control of KTMB’s operations.


MMC Corp Bhd is undertaking a due diligence exercise to privatise Keretapi Tanah Melayu Bhd (KTMB), people familiar with the matter said.

The company, controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, plans to pump in as much as RM1 billion to take control of KTMB’s operations.

According to the Railwaymen’s Union of Malaya (RUM), the Minister of Finance Inc (MOF) had given MMC the green light
to undertake the due diligence, which will take a few months.

However, RUM is against MMC or any other party taking over KTMB.

“They must have an agenda. We think KTMB can do well on its own. All it needs is a good management team to operate the
business efficiently,” said RUM president Abdul Razak Md Hassan.


An MMC official confirmed the plan and said the company will undertake a feasibility study to ensure that the rate of return on the investment will be more than 10 per cent.

It is understood that MMC, which had submitted a proposal to the MOF on the matter, plans to take over KTMB’s freight and passenger services. The railway infrastructure, meanwhile, will remain with the government.

The infrastructure valued at over RM50 billion is held by Railway Asset Corp (RAC), which is under the custodian of the Ministry of Transport.

This is not the first attempt by MMC to take over the operations of KTMB. MMC and Gamuda Bhd were eyeing to privatise KTMB and take over its assets in 2003. The consortium had held preliminary
discussions with the government but nothing materialised then.


Meanwhile, the source said as an operator, MMC will have to invest in rolling stocks required for the operations and
manage KTMB’s current workforce of more than 5,000 employees.

However, he said MMC will not have to absorb KTMB’s debt of over RM1 billion because the fixed assets comprising 11 depots, land, building and equipment will remain with the government.

"If MMC can proof that it could improve the efficiency of KTMB in providing the services to the public without government subsidies and funds, then its proposal may be considered," he said.

The source said this is the vertical separation of KTMB, where as a railway operator, MMC must be able to demonstrate that it can be an efficient and profitable railway company in the course of taking over the railway.

KTMB recorded RM1.45 billion in accumulative net losses up until 2008 and cannot "afford" to pay back its own operational costs and loans.

The operator has been bleeding red ink since it was corporatised in 1992 due to high operating costs. It did make a net profit of RM9 million to RM15 million from 1993 to 1995, before falling into the red again in the following years.