The Daily Pulse of Bursa Malaysia

Prolintas fails to shine. WIll it go below its IPO price?

Publish date: Mon, 01 Apr 2024, 08:19 AM
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Prolintas made its debut on March 25 on the Main Market of Bursa.

Prolintas holds 4 cash-generating highway concessions within the business trust, each generating consistent cash flows from toll collections.

The counter is the first business trust to be listed on the local bourse.

What is interesting about a business trust versus a traditional trust is that trust distribution is not affected by non-cash items such as amortisation, which reduce accounting profits.

This means distributions made will better match cash flows, which suits the stable cash-generation business of the toll highway concessionaire.

What’s enticing is that Prolintas has pledged to distribute 90% of distributable income, which will be adjusted for various non-cash items.

They have committed to distributing RM70 million this year, which is RM1.3 million higher than estimated distributable income and will likely need to be funded by its existing cash balance.

Given the attractiveness of the counter, yield investors would be keen to have a slice of the company, which is projected to generate 6% yield.

However, the maiden day of its listing, the counter fell flat at its IPO price of 95 sen. Maybe because Prolintas’ highway businesses have been making losses in the last 2 financial years.

In fact, its net loss ballooned to RM241 million in FY2023 from RM11.3 million in the previous year. This jump is net loss was mainly due to tax issue.

Prolintas’ unutilised business losses where deferred tax assets were previously recognised, are now unrecognised.

Deferred tax asset is recognised for unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax credits can be utilised.

Essentially, this is a reversal of deferred tax assets whereby, according to accounting standards, there is no probable future taxable profits

This means the company will likely continue to make losses in the future, and therefore no probable future taxable profits.

That said, analysts believe that the targeted distribution is sustainable as aggregate project free cash flow is sufficient to cover the distribution. Cash balance is also expected to remain ample, projected to reach RM456.8 million by end-2024.

They also believe that Prolintas’ revenue growth will be anchored by a steady increase in traffic volume.

Traffic volume is expected to grow at 3.4% p.a. over the next 10 years on the back of GDP, employment, and population growth.

In additions, development of new townships surrounding the city centre is also expected to be another pillar of growth, as Prolintas’ highways are strategically located around these townships.

There is also potential upside with yield-accretive acquisitions in the future as Prolintas has first right of refusal to buy 2 toll highway concessions, ie, SUKE and DASH expressways, held by its major shareholder.

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