Review

• Litrak’s 1HFY17 net earnings of RM120.0mn came in within expectations, accounting for 47.9% and 47.3% of ours and consensus’ full-year estimates.

• YoY, 1HFY17 net profit surged by 45.7% to RM120.0mn, in line with a 40.0% jump in revenue to RM268.4mn. The significant improvement in both the top line and bottom line were due to scheduled toll rate increase for LDP from RM2.10 to RM3.10, which was effected in January 2016.

• QoQ, 2QFY17 net profit was 3.5% lower as revenue declined by 2.7% to RM132.4mn. 2QFY17 was negatively impacted by lower traffic volume during Hari Raya Aidilfitri and discount given during the festivity and on Merdeka Day.

Impact

• Maintained.

Outlook

• While the LRT extensions have started operations end-June 2016, with stage 1 of MRT line 1 expected to commence operations on 16 December 2016, we do not see these as significant threats to traffic volumes of LDP and SPRINT. In our opinion, the current first mile and last mile transport connections, or rather the lack of them, are still inadequate to result in a meaningful switch in the mode of transport from private vehicles to public transports. Furthermore, stage 1 of the MRT line 1, which serves the corridor between Sungai Buloh and Damansara is not expected to draw large passenger numbers as it terminates before Kuala Lumpur city centre. We expect these lines to have minimal impact on traffic plying on the LDP and SPRINT.

Valuation

• No change to our discounted FCF valuation of RM5.58, based on unchanged required rate of return of 5.3%. Maintain our SELL call on LITRAK.

Source: TA Research - 30 Nov 2016