Journey to Wealth
Litrak - Turning heads HOLD
We maintain our BUY recommendation on Lingkaran Trans KotaHoldings (Litrak), with a higher fair value of RM3.90 (previously:RM3.77/share) ' pegged to an unchanged 15% discount of its revised DCF value(WACC: LDP -8.1%, SPRINT ' 8.6%).
The higher fair value encapsulates an 11% upgrade in FY12F netprofit forecast (FY13F: +9%, FY14F: +5%) following a stronger-than-expectedmargin trajectory for 9MFY11.
Litrak's 9MFY11 results came in ahead of expectations, accountingfor 80%-85% of both consensus and our full-year estimates. The main positivevariance, in our view, stemmed from better-than-expected EBIT margins (9MFY12:77% vs 75% a year earlier).
During the period, the group's bottomline surged 23% YoY arisingfrom the full-year impact of a scheduled toll rate revision from 1 January2011.
Sequentially, its earnings fell 2% QoQ to RM32mil. This was largelydue to a marginal increase in operating expenses incurred during the quarter.
Litrak declared a second interim dividend/share (DPS) of 7 senin 3QFY12, taking 9MFY12 DPS to 17 sen ' matching the payout last year. We haveassumed a total DPS of 18 sen for FY12, translating into a decent yield of 4%.
Litrak has been in the news recently, where the toll concessionaireis reportedly a take-over target of PLUSExpressways along with SILK Holdings.
But, we are unsure if Gamuda ' Litrak's major shareholder witha 45% stake ' would be willing to part ways with the urban toll operator. Thisbeing the case, Litrak has been a steady generator of Gamuda's cash flows overthe years.
Moreover, the continued uncertainties over toll rate hikesand associated risk of back-ended cash flows (i.e. extension of concessionperiod rather than outright cash payment as compensation for delays in tollhikes) is another drag.
Our HOLD rating is premised on its status as a core holding forinvestors seeking exposure to the toll concessions with the de-listing of PLUSand MTD Capital. This is backed by a decent yield offering of 4%-5%.
Source: AmeSecurities
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
