Pursuant to completion of the acquisition by ALR, Litrak holdings would have received an estimated equity value of RM2.698 bil for Litrak and Sprint. Gain from disposal of subsidiary and associate would amount to RM2.255 bil after taking into consideration of cost of investment in Litrak of RM50 mil and cost of investment in Sprint of RM392.93 mil.

With a gain on disposal of RM2.255 bil coupled with pre-existing retained earnings of at least RM100 mil, Litrak Holdings will be able to distribute dividend of RM2.355 bil, or 87% of total proceeds from disposal.

The remaining RM343 mil, or 13% of the disposal proceeds will have to be distributed via capital repayment. Pursuant to revised Companies Act 2016, the procedure for capital repayment is no longer that onerous. Companies Act 2016 introduced an alternative method for affecting capital reduction which can be done by passing special shareholders resolution and for the directors to provide a solvency statement, which is essentially a statement in writing signed by the directors that states the directors are satisfied that the company is able to pay its creditors, honor its next 12 months debt obligations and that its assets is more than its liabilities after the capital repayment exercise. The time period required for this process is generally 8 weeks from the date of the special shareholders resolution for capital repayment is passed.

@csan: if one were to consider opportunity cost then it would make sense to go with the the route which yields the highest IRR. However in the absence of opportunity cost which manifest itself in the form of lack of competing investment opportunity, then it would make sense to go with one which produces the highest ROI I suppose.

@csan: would you like to know what is the IRR for this scenario: buy on 21 Apr 2022 at RM4.71 and receives cash in the form of dividend and capital repayment amounting RM5.08 on 31 Jul 2022?

@csan: what is your calculation of IRR for the above 2 scenarios?

@Hemsley, to answer this question. Consider the following example:

1. Bought at RM4.03 on 1 Apr 22, hold until investors gets their estimated RM5.08 (say on 31 Jul 22) via dividend and capital repayment. The IRR under this scenario would be 101%.

2. Bought at RM4.03 on 1 Apr 22, sells today at RM4.71 . The IRR under this scenario would be 1,621%.

Course of action under no 2 is superior after taking into account time value of money

@okdoke: you are right. Was trying to look for more details and clues on ETC Links Sdn Bhd after you pointed this out.

Here's what I noticed sofar:
i) From segmental note disclosure in the annual report in pg 105, noticed that Litrak’s group business is broadly segregated into 2 segments namely i) highway; and ii) investment holding (under others). No other distinctive segment is observed. Investment holding is referring to the segment of investing activity by the Litrak Holdings, in its course of holding investment in its subsidiaries or associate company.
ii) The name ETC Links Sdn Bhd corresponds with the acronym ETC for ‘Electronic Toll Collection’. Electronic Toll Collection is a terminology referring to the manner in which transactions are made electronically at highways eg via Smart Tags or Touch n Go.
iii) Under the disclosure note for revenue in pg 82, no significant revenue was recognised apart from toll revenue.

Based on disclosure in the annual report, I don’t ETC Links Sdn Bhd is a substantial contributor to Litrak group’s revenue and earnings, if any at all. Another possibility is that it is subsidiary that rents out electronic toll collection system to Litrak and Sprint highway.

@okdoke: “Subject to the execution of the definitive agreements and completion of the Proposed Disposals, it is the intention of the Board of LITRAK Holdings to distribute the corresponding net proceeds of the Proposed Disposals to the shareholders of LITRAK Holdings”…
Means…
The board of Litrak Holdings has intention to distribute net cash received from the disposal of Litrak and Sprint to its shareholders. This however can only be done after: i) the shoreholders of of Litrak and Sprint execute a share sale agreement with ALR and ii) all conditions precedent of the share sale agreement are fulfilled (the date when all the conditions precedent of the share sale agreement are met is the completion date. Cash from purchase consideration can exchange hand upon completion).

@Hemsley: based on Litrak's announcement pg 4 https://klse.i3investor.com/web/staticfile/view/456114
it insinuate that RM5.08 is the final equity value after taking into account of cash balance as at 31 Dec 2021 and the RM0.15 dividend payout per share on 30 Mar 2022. However this RM5.08 equity value has yet to take into account of the 2% interest income which may translate to maximum additional RM0.01 more per share [RM621 mil of cash balance x 2% x (31 Jul 22 - 1 Jan 22) / 365 = RM7.18 mil / 532.84 mil shares outstanding]

Excerpt of Litrak's dividend for your convenience:
"The implied equity value of the Company pursuant to the Offers and including the net cash position of the Company as at the Valuation Date translate to an implied equity value of RM5.08 per LITRAK Holdings’ share (“Implied Equity Value”). For avoidance of doubt, the Implied Equity Value as at the Valuation Date has already been adjusted to take into consideration the interim dividend of 15 sen per LITRAK Holdings share paid by the Company on 30 March 2022."

@ observatory: no worries at all on my reply. Totally agreed with you on your take regarding the targeted completion timeline for the proposed highway acquisition by ALR which is prior to the earliest date for dissolution of parliament (ie. 31 Jul 22). Implication is that the targeted completion date for the ALR deal is prior to GE.

As for potential spoilers, I imagine only time will tell. Hopefully no negative surprises, fingers crossed.

On a side note, Gamuda's Deputy Group MD, Danny Rashdan appears to be upbeat while speaking to The Edge in an interview on 6 April 2022. Comment from Danny Rashdan quoted from this article “Once we get the green light from shareholders, then the week after that they (ALR) can issue the sukuk and pay us (Gamuda)... hopefully by end-May or early June,”.

https://www.theedgemarkets.com/article/gamudas-highway-sale-conclude-early-endmay-says-deputy-group-md

continuing from previous post

ii) Government to provide all necessary approval: Government has strong incentive to ensure this deal go through as the value proposition of this deal is tremendous to the Government. From Government coffer perspective, the government receives tax payment from concessionaire but at the same time pays toll compensation that is generally equivalent to = toll rate as per concession agreement – toll rate presently paid by motorist, multiply by traffic volume. Needless to say, toll compensation paid by government dwarf the tax collected from concessionaire since the government is compensating for shortfall in revenue, while collecting only 24% of taxable income. Case in point, compensation claim from the Government by Litrak ranges between 1.67 times to 1.95 times of taxes collected from Litrak during the period FYE2018 – FYE2021 (eg. for FYE2021: Litrak’s toll compensation claim claimed was RM125.2 mil while Litrak paid taxes of RM72.06 mil to the Government). By having ALR acquiring the highway and entering into a new concession agreement with the Government, the toll rates in the new concession agreement will be lowered to the toll rates presently charged to the motorist, negating the Government’s obligation to pay for toll compensation. At the same time, they will no longer be able to collect any further taxes since they will be granting ALR tax exempt status. No grouses from the government I suppose since the Government is net payee to the concessionaire (ie pay more than it receive from the toll concessionaire). Why is ALR being granted tax free taxus? This is government’s attempt to play its part in ensuring that ALR can accelerate repayment of its Sukuk payment to shorten the concession period. Recall that the new deal includes a term which allows for shortening of concession period in the event ALR’s Sukuk is fully repaid. In conclusion, any proposal that can reduce net payment from Government is gold. This proposal had struck the right chord with the Government and the Government simply has too much coins to lose if this deal falls through. From Government’s perspective, giving up their rights to collect taxes in exchange for being absolved from their obligation of hefty toll compensation is a no brainer trade off since toll compensation is at least 1.67 times to 1.95 times higher than the taxes collected based for Litrak’s case. On the non-quantitative aspect of things, this deal will resonate with the Rakyat, facilitating curry favouring effort when time draw closer to election season. The Government will be able to make statements that highlight the: i) potential billions in savings from toll compensation which can be redirected to other nation building purposes; ii) there will no longer be any more toll hike perpetually until the concession ends; and iii) toll booth can be removed once the ALR Sukuk is fully repaid, toll free thereafter.
iii) Successful fund raising by the ALR: Sukuk fund-raising by ALR will be successful if there are sukuk holders that are willing to subscribe to the Sukuk. This should not be a problem considering Litrak’s highway are matured highway, generating steady and recurring cash flows from operation to service ALR’s obligation under its Sukuk. In addition, extension of concession period by the Government would include a buffer period to buffer against unanticipated scenario whereby actual traffic volume deviates from the projected traffic volume. This provides further comfort to the Sukuk Holder that ALR’s default risk is low. Will ALR be subjected to the same policy risk of existing highway concessionaire? Highly unlikely since the thorny issue of paying toll compensation by the Government will no longer be in the equation after ALR acquires the highways.

@ observatory : In my view, the 9 ish % upside is appealing as I view the risk of the deal falling through as low despite of the fact that the success of the deal hinges upon several factors, namely: i) securing approval from offerees’ shareholders; ii) securing all necessary approval from government; iii) successful fund-raising by ALR. My take on the the 3 factors are as follows:

i) approval from offerees’ shareholders: shareholders will be keen to dispose of their highway since the offer made is a fair one, ie. at fair value. Willingness from shareholders stems from the fact that potential future traffic growth and the scheduled toll rate hikes for the remaining concession period would have been factored into the offer price. It is a matter of either receiving those nominal cash flows in the future or receiving the present value of those cash flows stream today after being discounted at an appropriate discount rate. Another incentive to the shareholders to sell at fair value would be the nature of toll highway concession business that is inextricably linked to policy risk. Government’s policy concerning toll highway can change in pursuit of a populist move, just to appease the Rakyat. Sophisticated shareholders (Gamuda and Institutional Investors) have witnessed the potential fallout of this in 2018 when the Government of the day proposed for nationalisation of the toll highways. Nationalisation means Government exercise its right under the Concession Agreement to expropriate the highways in the name of national interest. Under this scenario, the concessionaires will have to surrender the highway back to the Government and the Government will have to pay a compensation sum to the concessionaire. This compensation sum payable by the Government is not based on fair value, but rather derived in accordance to the terms under the Concession Agreement which do not consider the future cash flow of a highway. Concessionaires compensated in this manner would have to forgo the value from the potential future traffic growth and the scheduled toll rate hikes for the remaining concession period. Under the present offer from ALR, shareholders will be able to exit from this business at a fair price, without being subjected to further policy risk. On top of that Gamuda will be able to plough cash from disposal of its highway assets for future projects and pare-down its highway related debt, paving way for more dead head room for future projects.

continuing from above post
Is our Government willing to bend its back all the way to do this you may ask? Unknown to many, our Government had been engaging highway toll concessionaires for quite some time now (years to be exact) to come up proposals that will lead to a win-win scenario for 3 key stakeholders for a toll highway business namely, the Rakyat, the Government, and the shareholders of the toll highway concessionaires. The Government understands that the interests of these 3 key stakeholders must be protected in order to resolve an age long dilemma of our Government that was stuck between a rock and a very hard spot for a long time. This dilemma comes in the form of whether they should continue to pay hefty toll compensation to the toll concessionaires for forbidding them to charge the toll rates based on was agreed upon under the concession agreement. On one hand, Government may face back lashes from the Rakyat which may threaten to diminish its popularity among voters and on the other hand if they do not hounor the concession agreement, the credibility of the Government as a counterparty that observe the sanctity of agreements that they have entered into will come under threat. This situation is not desirable for the Government as they understand any back pedalling or failure to honour terms of the concession agreement will inevitably, on the best-case scenario increase the cost of financing future Public Finance Initiative (“PFI”) as both borrowers and shareholders of the PFI demand additional premium to compensate for risks associated with this tendency of the Government to back pedal. On the worst-case scenario, all future PFI initiatives going forward will stifled (due to lack of financing and interest). Recognising the importance of the PFI model in ensuring that investment in infrastructure continue to take shape, which will in-turn drive development and economic progress, the sanctity of playing a fair game will have to be upheld. This is why the concession period will have to be extended. The magnitude of concession period extension is not a result of leverage that one has on the negotiation table, but rather, it is a result of a mathematical formulae to solve what is the additional number of years require to make up for the loss of free cash flow to the firm for lowering the revenue. All this is off course after taking into consideration of the time value of money. One has to bear in mind that the private sector operate on one mantra only as opposed to charitable organisation. The private sector’s mantra is long term wealth creation for its shareholders. Any investment must take into consideration of appropriate risk-adjusted return.

The fact that ALR has been established with board filled with reputable corporate leaders, I am certain that the deal already had Government’s blessing long before it was announced as there would have been countless engagement with the government and many level of meetings within the Government to clear the various ministry’s concern even before the deal can morph to the stage of ALR’s establishment. I wouldn’t be surprised if the Government is already in the final stages of formally approving what was announced in Litrak’s announcement.

Continuing from the above post.
Apart from considering from the perspective of whether the deal will be accepted by Gamuda/Litrak, there is another consideration that will have to be taken into account and that is the likelihood of : i) ALR completing its fund raising exercise via sukuk issuance to fund the acquisition; and ii) willingness of Government to play ball in providing all necessary approvals to facilitate the completion of the deal, including the tax free status of ALR, the change of terms under the concession agreement and the change in shareholding structure of the Gamuda related highways.

Essentially, ALR will raise sukuk which is in a form of debt to fund the acquisition of the highways. Thereafter, ALR will operate the highway to generate cash flow to repay the sukuk holders and servicing its financing cost. Since sukuk is essentially a form of debt, the concern of the sukuk holders will be highly similar to those of a lender. They will be asking “will the borrower default on payment? Will I get my money back in accordance to the term of the loan agreement?”. As Litrak’s highways are matured assets, it is characterised as having stable traffic volume demand and minimal growth, which is expected of a matured highway. This in turn will translate into recurring and predictable cash flow from operation, alleviating concerns on unanticipated shortfall in cash flow to service the sukuk. In addition, the sukuk holders will be pleased with one feature of the highway restructuring proposal. This term is encapsulated in government’s willingness to extend the concession period in the event future traffic volume falls short on the projected traffic volume. This feature can easily be interpreted as some form of back stop feature by the Government to ensure that ALR is able repay its sukuk to prevent default, particularly on the sukuk tranches with longer term maturity. Such feature reduces default risks to the sukuk holders, further improving the probability of a successful fund-raising exercise.

The Enterprise Value which forms the basis to arrive at the offer price by ALR is derived using discounted cashflow approach. This DCF approach essentially discounts the future cash flows from operating activities and cashflows from investing activities to arrive at free cash to the firm. This would imply that future toll rate hikes and future traffic growth would have already been embedded into the valuation, also implying that the offer is fair.

Regarding @Traderjoes concern on whether or the disposal to ALR is a good deal considering the timing of Sukuk’s full settlement and potential increase in future dividend from a stream of future cash flow that is relieved from debt obligation, the truth is the upside has already been embedded into the valuation. Referring back to the above para regarding Enterprise Value, you would observe that EV is derived by discounting free cash flow to the firm, this is before considering the debt obligation of the company. Equity value of Litrak, which is what investors like us would be getting in turn is EV less debt outstanding. As such, the price offered by ALR has already taken into consideration of the future cashflow of litrak. What is being offered today is merely that stream of dividend, discounted back to today to take into consideration of the timing of those future cash flows. Do note that the additional estimated RM200 mil per annum will not be received today. It will be received in the future.

As to whether Litrak will reject the deal, this matter is above the paygrade of Litrak’s management and Board of Directors. This offer from ALR has now become a matter which requires shareholder’s approval. Since this disposal is likely a ‘Major Disposal’, it would require consensus of at least 75% of Litrak’s shareholders’ approval. I believe approval is forthcoming given that i) Gamuda owns 43.18% (no objection from Gamuda I suppose); ii) This offer is fair as highlighted by all analyst covering Litrak and Gamuda. This imply that a similar conclusion would be reached by the Independent Advisor to be appointed by Litrak’s Board and also the other Institutional Investors which owns 41.83% (Institutional Investors are no slouch when it comes to valuation).

Thereafter, we can expect both Gamuda and other Institutional Investors to vote in consensus for declaration of dividend and capital repayment to get the cash back into their hands. Delisting is likely. Why is this scenario plausible? Its an open secret that Gamuda had long wanted to monetise its highway assets to fund its other business which Gamuda perceives to be more lucrative and core to its business, and also insulate itself from the policy risks of our government. As for the other Institutional Investors, they will have the view that they do not need Litrak to diversify its exposure into other businesses or industry since diversification can be done by themselves via their investing endeavour. In addition, while Litrak’s management and board has proven itself in the business of highway concessions, it remains to be seen if the same achievement can be replicated in other businesses.

Wat the fak, I want to hear your rags to riches story. It will be inspiring and educational for sure

Hi Phillip, I can’t seem to join your telegram group. Is it by invitation only

Please credit the Reddit writer. It’s good practise to do so, while everything is self regulatory.

https://www.thestar.com.my/business/business-news/2021/01/13/hartalega-expects-glove-asps-to-rise-by-50-in-q3

Woah Dicky, you were right after all. All hail Oracle of Malaysia ... lol

Dicky me. Can shout out the legendary TP of yours again?

Ya , screw the owners. What type of share is this? Buy already won’t go up. Only know how to go down. This is the worse company that I have ever invested in. What is wrong with the company? Why can’t it make it share price go up? Simple thing also cannot do. Just make it go up so that I can sell with at least 10% profit la. What is so difficult? Omg cannot understand all these companies with declining share price sometimes

I wonder what such degrading comments do. Nothing actually. Wasted 3 seconds of my life reading it

A lot of institutional investors buying or bought into glove counters on the back of clear visibility in near term earning growth.

For god, gold and above all... glory

“ dear residence, please note that disruption to the lift services is only temporary. Services to floors above level 9 shall resume once maintenance works are completed . Thank you’

"Our lift services are presently experiencing technical glitches, please be informed that lifts services to 9th floor and beyond will be suspended until further notice. Alternatively, 9th floor and beyond are reachable by foot via fire escape staircase. Thank you"

@yttihs: I believe in your words, need it to break RM9...lol

http://disclosure.bursamalaysia.com/FileAccess/apbursaweb/download?id=175767&name=EA_DS_ATTACHMENTS

@yttih: In Top Glove's previous secondary listing in Singapore, they achieved this through disposal of shares by substantial shareholders (Tan Sri and Gang). Should they employ the same route, there will be no impact on valuation as no new shares will be issued.

losing steam already... do sth guys

Looks like there will be no crossing RM9 today

@yttihs, I see. Ok. Command centre under maintenance...lol

what happened to our command centre?

wow huat ar

DickyMe should be awarded with the most consistent pessimistic award. Lol , great stamina this guy

I think the message posted by investingbasics is written by KYY

DickyMe what are the good counters to invest now

As for the Macquarie article, if you scroll to the bottom. It appears that the report is from cimb as opposed to Macquarie. Perhaps admin made a mistake

Actually KYY wanted to influence readers to sell. He has sold and now intend for the price to go lower before he reenters. He can maximize his return if we all follow his lead. Read again, WE can maximize HIS return.

Even when bonus issue is made out of reserves, the impact will still be the same as the share of the company will more liquid post bonus issue since the share price becomes lower, promoting liquidity by insulating physchological price barrier. But by affecting a bonus issue by splitting the shares, the company will be able to retain its reserves for dividend distribution purposes.

All this open expression of incest act... does it help the price movement in any way I wonder. Do let me know if this technique works. Could be a breakthrough in modern finance theory

hope this wont affect Top Glove sales significantly

hi Im new in investing. Just invested in Top Glove when the market was bad recently. I read on some blog that Top Glove share price dropped because of one analyst report. Can some one share that report thanks.