Lingkaran Trans Kota Holdings - Within Expectations

Litrak’s 1QFY13 net profit of RM35.1m were within our estimates but above consensus, accounting for 26.5% and 28.6% of both full-year projections respectively. Coming off a dismal 4QFY12, during which the company dived into the red on a chunky amortization expenses incurred on its LDP highway, Litrak’s 1QFY13 had largely normalized as it saw improvements across the board. We make no changes to our forecasts. Maintain BUY, at an unchanged SOP FV of RM4.46. The key re-rating catalysts are the likely turnaround in its SPRINT operations in FY13 as well as a potential privatization by PLUS.

Decent start. Litrak’s 1QFY13 revenue clocked in at RM92.7m (+3.5% y-o-y; +4.1% q-o-q), coming within both our and consensus estimates at 25.4% and 25.7% of the FY13 forecasts respectively. EBIT was also higher q-o-q at RM70.6m due to higher amortization expenses charged on its LDP highway in the previous quarter but down 5.2% y-o-y as EBIT margin shrank 690bps to 76.2% on revised traffic projections, which knocked off the amortization recorded. All in, the company’s 1QFY13 core earnings came in at RM35.1m, bouncing back to the black from the 4QFY12 loss of RM18.9m, but still down by a marginal 3.7% partly due to slight uptick in effective tax rate.

Still making handsome payouts. Management has declared a first interim tax-exempt DPS of 10.0 sen, which translates into a payout ratio of 142.9% for the quarter. With its net gearing having improved from 385.5% in FY12 to 283.3% currently, we believe that its DPS would go up to 18.0 sen for FY13 and 20.0 sen for FY14 should its 50%-owned SPRINT highway manage to break even this year. This will translate into a decent dividend yield of 4.4% for FY13 and 4.9% for FY14.

BUY. With its 1QFY13 numbers largely in line, we make no changes to our core assumptions for now. All in all, we continue to like Litrak’s decent fundamentals, which enable it to offer appealing dividend payouts as we expect its SPRINT operations to finally break even this year. Meanwhile, rumours of a potential privatization offer from PLUS may help to provide near-term support to its share price. Hence, we maintain BUY, with our FV unchanged at RM4.46, based on SOP valuation.

Source: OSK