Private bus operator KTB says no to fare discounts

Saturday, 18 October 2014

By: EUGENE MAHALINGAM, ZUNAIRA SAIEED

Bus passengers catching on the Cityliner bus on the last day before the company ceased its operation at Pudu Sentral, yesterday. AZMAN GHANI / The Star

 

KONSORTIUM Transnasional Bhd (KTB), Malaysia’s largest bus operator, believes that its earnings will be affected if there are discounts offered for selected routes.

Commenting on the Prime Minister Datuk Seri Najib Tun Razak’s speech during Budget 2015 when the Government announced plans to offer discounts on monthly bus fares for city workers residing outside Kuala Lumpur, KTB managing director Datuk Seri Nadzmi Salleh says he is still “not completely clear” on who will be providing the discounts.

“Nobody said that we (the private bus operators) will be offering discounts. If it is by the Government operators, then it will affect the businesses of the private operators,” he tells StarBizWeek.

Under the budget announcement, the first three routes that will be offered discounts are Rawang-Kuala Lumpur, Klang-Kuala Lumpur and Seremban-Kuala Lumpur.

Nadzmi believes it’s not the private operators that are giving the discounts.

“I don’t think it’s the private operators because we’ve been asking for a fare increase for years!

“You have to look at the holistic picture. Patchwork is not going to benefit the entire system. For it to work, it need to be attractive and convenient for people to use.

“If you have this value proposition, then more people will start switching to public transport. That’s what the Government should be promoting in the long-term.”

According to Nadzmi, bus fares have generally been increasing around 3% every year in Singapore.

“When it’s that low, the consumers won’t feel it. Our fares have not increased for over five years. The increment will be more drastic if it’s over a longer term.”

The Budget announcement saw the company’s share price jump 8% to close at 32 sen on Tuesday.

However, the stock price has been steadily declining since.

“The brief share price rise is likely a knee-jerk reaction to the announcement at Budget 2015. But with Nadzmi recently increasing his stake in the company, investors were probably expecting something positive to come out of KTB very soon,” said an analyst.

On Sept 9, Nadzmi strengthened his hold on KTB by acquiring a further 15% in the company. This effectively increased his stake to almost 75% in KTB, the maximum that he can acquire without having to trigger a mandatory general offer.

Nadzmi acquired 64 million shares (or 15.89%) in KTB from Affin Investment Bank at 62.5 sen each for RM40mil through Nadicorp Holdings Sdn Bhd.

Affin ended up with a stake in KTB following a corporate exercise in the company, which was formerly known as Park May.

Nadicorp, which was already a substantial shareholder in bus operator KTB with a 9.14% stake prior to the transaction, now has 100.8 million shares or 25.03%, after acquiring the 64 million shares.

Since Sept 9, KTB’s share price has risen more than 15%.

Nadzmi, who is Nadicorp’s executive chairman, says the acquisition is part of a move to recapitalise KTB.

According to KTB’s annual report, Nadzmi owns 4.78 million shares or a 1.19% stake in KTB, while Kumpulan Kenderaan Malaysia Bhd, which is KTB’s largest shareholder, owns 129.32 million shares or 32.11% in the company.

Nadicorp has five main business units, namely, transportation, manufacturing, property and plantation, defence and other support services.

Nadzmi was appointed KTB chairman and managing director in September 2005.

Meanwhile, Nadzmi says there needs to be a “backbone network” within the local transport system whereby people can commute with ease.

“There has to be a backbone network that can bring people from outside the Klang Valley and into the city. But once they have arrived, they need be able to get to their final destination.

“I don’t think a train will carry me to my doorstep. Public transport must take into consideration the convenience aspect as well - including walkways, which would cover passengers from the sun and the rain.”

Nadzmi reiterates that “patchwork” was insufficient to promote a complete public transport system.

“It has to be a total concept. You can’t just do patchwork - it doesn’t make it more attractive. Patchwork means we will be investing too much but we get very little benefits.”

A major concern for Nadzmi is that the local bus industry is heavily regulated, with too many players in the country. According to him, there are over 200 bus operators in Malaysia fighting for the slice of the profit pie.

Incorporated on June 5, 2003, KTB was formed to facilitate the takeover of financially troubled Park May Bhd. This paved its way to a listing on Bursa Malaysia on June 15. The company currently operates about 1,200 buses and is in the midst of replacing its aging fleet.

To improve the local public transport system, Nadzmi believes that building more highways will not improve anything.

“I think we cannot be building more roads. It won’t solve the problem. From various case studies in America, the more roads you have, the more congestion there will be.

“You can build more roads once you have a good public transport system in place. Another way is to incorporate an electronic road pricing system,” he says.

An electronic road pricing system is based on a “pay-as-you-use principle” and is used to manage traffic congestion. Under this system, motorists are charged when they use priced roads during peak hours.