Litrak posted 9MFY12 earnings of RM102.1m (+24.6% y-o-y)
which was above our expectations by meeting 80.7% of our full-year estimates,
thanks mainly to lowerthan-expected losses at SPRINT. It declared a second
interim DPS of 7.0 sen with its 9MFY12
DPS now standing at 17.0 sen. Going forward, we expect Litrak’s earnings to be
fairly resilient with the next toll hike for its Damansara link scheduled only
in 2015. In view of the media speculation on a potential takeover offer by PLUS
Expressways, we are removing our 10% discount attached to our previous
valuation and our SOP-derived FV now stands at RM4.72.
Above expectations. Litrak’s 9MFY12 revenue came in at RM269.9m
(+14.8% y-o-y). YTD operating profit
increased 15.0% y-o-y to
RM214.5m, with a marginal 20bps improvement in its EBIT margin to 79.6%. All in
all, the core earnings of RM102.1m (+24.6% y-o-y) came in slightly above our
expectations at 80.7% of our full-year estimates owing to lower losses incurred
by its 50%-owned SPRINT. From a quarterly perspective, 3QFY12 results generally
marked some decent y-o-y improvement on the recognition of higher toll rates
but the numbers were weaker sequentially owing to seasonal factors.
Decent yield. The
company took the opportunity to declare a second interim DPS of 7.0 sen with
its 9MFY12 DPS now standing at 17.0 sen. This implies a healthy payout ratio of
84.1% (vis-a-vis our previous assumption of 70%) based on its 9MFY12 earnings,
which translates into a decent dividend yield of 4.2% YTD. We now expect its payout
ratio to hover around 75%-80% (from 65%-70% previously) as a result of its better cash flow management,
and this implies an annualized DPS of 20-24 sen over the next three years.
No hike expected.
With the widely anticipated General Election likely to take place this year,
we do not foresee any toll hikes in the
near term with the Government likely
to continue subsidizing motorists at RM0.50 on LDP toll rates. This is
positive for Litrak as it still receives
the agreed rate of RM2.10, without suffering a decline in traffic volumes associated with
a toll hike. The next scheduled toll
hike takes place in 2015 for its Damansara link, which has almost reached its
saturation point with an average daily traffic of approximately 60k.
BUY. We
revisited our model and lowered our losses assumption on Litrak’s 50%-owned
SPRINT operations given the encouraging progress made YTD. With that, our EPS
forecasts for the next 3 years are revised upward by 6%-7%. In view of the
current media speculation on a potential takeover offer by PLUS Expressways, we
are now removing our 10% discount attached to our previous valuation, in
anticipation of more news flow in the coming months which could give a boost to
the share price. Hence, our SOP-derived FV now stands at RM4.72. Maintain BUY.
Source: OSK188
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