Results Review

• Litrak’s 1HFY20 net profit of RM136.7mn came in within our expectation but above consensus forecast, accounting for 51.7% and 53.1% of ours and consensus’ full-year estimate respectively.

• 1HFY20 net profit surged 18.1% YoY driven mainly by lower finance cost (-20.1%) and improvement in share of result of an associate, which turned around to record a profit of RM10.0mn from a loss of RM1.6mn in the corresponding period last year. 1HFY20 revenue grew marginally by 0.6% to RM260.0mn as the government rolled-out Rapid KL My100 and My50 unlimited travel pass for rail, BRT, Rapid KL buses in Klang Valley since 1 January 2019.

• On a sequential basis, 2QFY20 net profit was 1.8% higher at RM69.0mn, in tandem with a 1.8% growth in revenue to RM131.2mn.

Impact

• Maintain FY20 to FY22 earnings forecasts.

Outlook

• In June 2019, The Ministry of Finance (MoF) offered to acquire LDP, SPRINT, KESAS and SMART. The anticipated equity value of LITRAK’s 100% stake in LDP and 50% stake in SPRINT comes to RM2.75bn, or about RM5.207 per LITRAK share. The offer has been approved by the Cabinet of Malaysia, subject to the execution of definitive agreements and shareholders’ approvals. Should the takeover materialise, we expect LITRAK to distribute majority of the proceeds to shareholders of LITRAK.

Valuation

• No change to our target price of RM5.21, based on the offer price by MoF. Maintain Buy.

Source: TA Research - 29 Nov 2019