We maintain our BUY recommendation on Lingkaran Trans Kota
Holdings (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 net
profit forecast (FY13F: +9%, FY14F: +5%) following a stronger-than-expected
margin trajectory for 9MFY11.
Litrak’s 9MFY11 results came in ahead of expectations, accounting
for 80%-85% of both consensus and our full-year estimates. The main positive
variance, 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 arising
from the full-year impact of a scheduled toll rate revision from 1 January
2011.
Sequentially, its earnings fell 2% QoQ to RM32mil. This was largely
due to a marginal increase in operating expenses incurred during the quarter.
Litrak declared a second interim dividend/share (DPS) of 7 sen
in 3QFY12, taking 9MFY12 DPS to 17 sen – matching the payout last year. We have
assumed 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 concessionaire
is reportedly a take-over target of PLUS
Expressways along with SILK Holdings.
But, we are unsure if Gamuda – Litrak’s major shareholder with
a 45% stake – would be willing to part ways with the urban toll operator. This
being the case, Litrak has been a steady generator of Gamuda’s cash flows over
the years.
Moreover, the continued uncertainties over toll rate hikes
and associated risk of back-ended cash flows (i.e. extension of concession
period rather than outright cash payment as compensation for delays in toll
hikes) is another drag.
Our HOLD rating is premised on its status as a core holding for
investors seeking exposure to the toll concessions with the de-listing of PLUS
and MTD Capital. This is backed by a decent yield offering of 4%-5%.
Source: AmeSecurities
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