Lingkaran Trans Kota Holdings 3QFY09 : Close to forecast

December 10, 2008 at 3:03 am Leave a comment

• Revenue almost flat.
The Group’s 2Q09 revenue came in almost flat at RM74.6m (-0.2% y-o-y, +0.3% q-o-q). This brought its 1H09 revenue to RM149.1m, which is 1.2% higher than 1H08 and 49% of our projected FY09 revenue. The fairly even revenue was achieved, as traffic volume remained
consistent despite the fluctuations of fuel price over the quarters under review.
• Eroding margins.
The Group recorded a PBT of RM35.4m (-7.6% y-o-y, -26.0% q-o-q) and a net profit of RM24.8m (-5.2% y-o-y, -27.8% q-o-q). This was mainly due to higher highway development expenditure charged to the income statement arising from pavement rehabilitation exercise, higher share of
losses from jointly controlled entities and higher finance cost due to the recognition of the redemption sum on a discounted bond, which was lower than its debt book value in the immediate preceding quarter.
• Moving forward.
The continuing fall in the cost of fuel may have a positive impact on the group’s performance. Petrol prices have fallen from RM2.70/ litre in June 2008, to the current RM2.00/ litre. We may see an improvement in traffic volume if fuel prices do not start moving upwards. Though there is no clear direction on the government’s proposal to reduce toll rates, this is still a cause for concern for Litrak. However, at this point, it is believed that the terms of the concession agreement will be upheld, even if the government decides to reduce the rates going forward.
• Upgrade to Buy.
We upgrade our call to a BUY as Litrak is already trading below its trough valuation during the Asian financial crisis. We tweak some assumptions to our DCF valuation to derive at our revised target price of RM2.22 (previously RM2.50).

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