KUALA LUMPUR: Lingkaran Trans Kota Holdings Bhd’s (Litrak) net profit is expected to jump 50% year-on-year in the financial year ending March 31, 2017 (FY17) due to the 48% scheduled toll rate hike since early this year, according to Maybank Investment Bank.
Maybank said the toll hike would lead to higher free cash-flow (FCF) which would support higher dividends for Litrak.
“We raise our RNAV-based target price to RM6.10 and FY17-18 dividend per share forecasts to 35 sen. The stock offers a decent total return of 9% from the current share price and 6.3% in potential dividend yield. Upgrade to buy (from hold),” the research house said.
It explained that Litrak’s fourth quarter to March 31, 2016 strong 66% year-on-year and 50% quarter-on-quarter jump in net profit was in line. The exceptional results were driven by the 48% scheduled toll hike at the Damansara–Puchong Highway (LDP) on Jan 1, 2016, offsetting weaker traffic volumes. This, alongside higher contributions from 50%-owned SPRINT, led to FY16 net profit rising 26%.
“We forecast a stronger net profit growth in FY17 of 50% year-on-year due to the full-year impact of the LDP’s scheduled toll hike,” it said.
However, Maybank said the January 2016’s scheduled toll hike did not result in any actual rate hike at the toll plazas. Instead, the difference would be compensated by the government.
“On expectation that government’s compensation would be timely as they have been in the past, the concession cash pile should grow considerably, offering upside to dividends.
“This is highly possible as we estimate the concession’s finance service cost ratio (FSCR) to be at 4 times by end-FY17, while its debt covenant only prohibits dividend payout if its FSCR falls below 2 times,” Maybank said, adding that Litrak’s average dividend payout ratio was 70% (FY13-FY16).
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