Prasarana: Accumulated Losses of More Than RM39 Billion?

According to the edge markets.com, Prasarana – the public transport owner/operator – had accumulated losses in excess of RM38.8 billion, as at end 2018. Prasarana is a wholly-owned outfit of the Minister of Finance Incorporated. For financial year ended December 2018, Prasarana’s after tax loss was RM5.15 billion on a revenue of RM746.1 million. The estimate for 2019 was revenue to be in the region of RM800-900 million. Impairments based on latest accounting standards, may have impacted after tax loss of over RM5 billion in 2018. Total impairments could be in excess of RM30 billion (The Edge, 5 Aug 2019). Total assets (in 2017) was reported at RM27.2 billion.

Rail service/ridership rose 10% year-on-year (“yoy”) to 113 million in the period January-June 2019. Bus service declined by 10% yoy for the same period to 81 million passengers.

The current model is not sustainable – the tax payer is meeting any cashflow deficit. So what’s feasible?

Prasarana has to aggressively move forward on transit-oriented development (TODs) to boost its revenue. Part of this development is to meet capex requirements while the balance will provide recurring income to cover deficits. The potential to develop 10 TODs is there. And the location of each is either in prime residential or business area. It is organising and partnering with the right developer to meet revenue objectives that matters.

The other option is to have a congestion charge on private vehicles for inner city movement/travel. There are several models in place – Singapore and London are prime examples. Another is to re-schedule existing liabilities with long-term papers (50 or more years) following projected cashflows. Others may include retail, advertising and marketing revenue enhancements. And of course cost containment is being pursued currently. The easiest is to raise fares but that is not feasible in current market conditions.

There are several possibilities to boost revenue, contain costs and generate value for assets held. All it takes is a little bit of imagination and drive to implement the steps. Sounds simple, doesn’t it?

Reference:

1.Two Names Came Up to Helm Prasarana - Sources, 21 Jan 2020, The Edge

2. Jose Barrock, Newsbreak: Impairments at Prasarana for FY2018 could exceed RM30 billion, 5 Aug 2019, The Edge

3. Prasarana set to achieve up to RM900 million revenue for FY19- group CEO, 19 Aud 2019, Bernama

4. Prasarana expects to cut losses thie year, 20 Aug 2019, The Star