Lityan shares lifted by speculation on new GLC status

PETALING JAYA: Shares of Lityan Holdings Bhd posted sharp gains for a second straight day, lifted by heavy speculation that the revamped firm’s new status as a government-linked company (GLC) would put it in a better position, at least financially, to secure lucrative public contracts.

The stock yesterday hit a high of RM2.88 but closed at RM2.70 – up 55% from Friday’s closing of RM1.74. The counter was relisted on Oct 30 at a reference price of RM1 after the completion of its restructuring exercise.

Post-restructuring, Lityan is 56% owned by Lembaga Tabung Haji (LTH). The firm has a market value of RM170mil, based on current outstanding shares of 63 million and yesterday’s closing price. A total of 28.3 million shares were traded yesterday.

Lityan group managing dircetor and CEO Nor Badli Mohd Alias told reporters on Friday that the company had partnered China’s Huawei to bid for part of Telekom Malaysia Bhd’s massive RM11.3bil high speed broadband project.

Recent press reports suggested that Huawei was a leading contender for the project. “This makes Lityan an attractive stock to punters,” a head of research at a local brokerage remarked.

Lityan is starting on a clean slate post-restructuring, and the injection of LTH’s information technology (IT) unit TH Technologies Integrated Solutions would immediately improve its profile and bump up its order book.

So far this year, Lityan’s financial results have yet to inspire.

It made a net profit of RM608,000 in the third quarter ended Sept 30, a slight improvement from RM597,000 in the second quarter.

“Yes, we will do better,” Nor Badli told StarBiz in a reply via SMS yesterday on the company’s prospect for the last quarter and next year onwards.

At least two brokerages – MIDF Research and AmResearch – projected Lityan’s net profit would hit RM8.8mil for the year ending Dec 31 (FY09). The two also have the same net-profit forecast of RM15.6mil, or 24.8 sen per share, for FY10.

“Undoubtedly, Lityan’s financial performance will determine the direction of its share price,” MIDF Research analyst Mohd Izhar Mohd Alauddin said. Lityan operates via two main subsidiaries involved in the IT and telecommunication sectors, where competition is often tough and margins are normally thin.

“We believe Lityan is more comparable to Heitech Padu Bhd, given that its customers are primarily government agencies and GLCs,” Izhar said.

Despite its lack of proven track record, investors have high expectations of Lityan to deliver, judging from the stock’s steep advance post re-listing.

It remains to be seen whether the group’s partnership with Huawei would bear fruit, and if it does, whether Lityan would be able to meet these expectations.

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