Shares in LITRAK jumped 16.3% in early trade on Monday after the Government proposed to takeover its highway.

The concessionaire jumped 17.58%, or 74 sen to RM4.95, its highest since September last year. It is currently the top gainer on Bursa Malaysia. It is currently trading at a PE ratio of 9.4 times. In the past one year, the counter has gained 17.99%.

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The government has made a RM6.2bil offer to take over Litrak and three other toll concessionaires linked to GAMUDA. The highways include Kesas Holdings Bhd, Sprint and Syarikat Mengurus Air Banjir Dan Terowong Sdn Bhd (Smart).

In addition, MoF Inc made an offer to Gamuda Bhd offer to acquire stakes in Kesas, Smart and Sprint. Gamuda owns a 44% stake in Litrak, a 50% stake in Sprint, a 70% stake in Kesas and a 50% stake in Smart. The government’s offer values Kesas at RM1.377bil, while Smart is worth RM369mil, Sprint at RM1.98bil and Litrak for RM2.47bil.

Gamuda shed 3.39%, or 13 sen to RM3.70 with 10.6 million shares traded.

According to Maybank Investment Bank Research, the government’s offer price translated into an effective equity value of RM2.36bil (96 sen per share) for Gamuda’s four highways, 8% below its equity DCF value of RM2.56bil.

“Our RNAV-TP is raised to RM3.50 (+25 sen) after updating for takeover value of the highways. We believe this is priced in.

“Based on a lower earnings base from our sensitivity analysis post the sale of highways, Gamuda now trades at an implied FY20E PER of 21.6x (+2 SD). Follow-up questions will be how the cash proceeds will be used and Gamuda’s strategy to fill the earnings void,” Maybank said.

Read more at https://www.thestar.com.my/business/business-news/2019/06/24/quick-take-litrak-jumps-17pc-on-highway-takeover/#1lzzm7z7x2iA7g7x.99