SHARES of Lingkaran Trans Kota Holdings Bhd (Litrak) closed 7 sen higher at RM2.41 yesterday on volume of 35,500 units as they continued their steady recovery from recent lows.
An analyst with AmResearch said the slide in Litrak's share price over the past two months could be attributed to investors' negative reaction to the widening losses of its 50% joint venture with Sistem Penyuraian Trafik KL Barat (SPRINT) and provisions or write-offs for the Fastrak electronic toll collection system.
“The main reasons for SPRINT's losses were high finance charges, especially in the early years of its operation, and slower traffic growth,” the analyst said, adding that SPRINT would likely continue to affect Litrak's performance until financial year 2009.
Going forward, however, the research house expects Litrak to achieve better results on account of no further provisions for Fastrak and the completion of new interchanges and upgrading of existing ones.
“Litrak is a solid defensive stock with reasonably attractive dividend yield of 4.3% per annum over the next three years,” the analyst said.
He added that future “wildcards” included a scheduled toll-rate hike on Jan 1, 2007, and higher dividends from financial year 2008, assuming the toll charges were raised.
He said another point worth noting was the counter's steep 59.7% discount vis-a-vis AmReseach's revised net asset value estimate of RM5.81 per share for the company, providing some upside should the stock be re-rated.
“For the next three financial years ending March 31 (FY05 to FY07), we forecast normalised earnings per share to grow at a compound annual rate of 10.6%. This is predicated on resilient traffic growth on the Damansara-Puchong highway, which is benefiting from rising income and urbanisation within the Klang Valley,” he said.
He said the resilient traffic growth on the highway would translate into strong cashflow of RM171mil to RM214.3mil for the next three years.
AmResearch is maintaining a “buy” call on Litrak shares with a 12-month target price of RM3.20.