PETALING JAYA: Lingkaran Trans Kota Holdings Bhd (Litrak) remains an attractive dividend play despite the company’s prospects being dented by lower traffic volume due to Covid-19-induced lockdowns.
Backed by a healthy cash balance, the highway concessionaire’s dividend yield has the potential of reaching 6.4% for the financial years (FY) ending March 31,2022, and 2023.
This should sustain investor-interest in the shares of the company, which owns 100% of Lebuhraya Damansara-Puchong, or LDP, and 50% of the Sprint Expressway.
Litrak’s share price closed down three sen to RM3.90 per share yesterday.
According to Maybank Investment Bank Research (MaybankIB), the counter could offer up to 26% of upside based on the brokerage’s 12-month target price of RM4.95 for Litrak’s shares.
MaybankIB maintained its “buy” call on Litrak, although its latest target price for the company’s shares had been revised down from RM5.15 previously.
The brokerage revisited its traffic assumptions on the LDP and Sprint, imputing higher contraction in FY21 in view of the movement control order (MCO) 2.0 and conditional MCO 3.0, as well as a slight delay in recovery in FY22, with Covid-19 vaccination expected to take place this year.
It lowered its dividend per share (DPS) forecast for Litrak to 20 sen for FY21 from 25 sen previously, but it maintained the DPS at 25 sen per year for FY22 and FY23.
“At our 25-sen DPS estimated for FY22, this offers a good 6.4% yield, 332 basis points above the 10-year Malaysian Government Securities’ yield of 3.04%, ” MaybankIB explained.
It noted Litra had a cash balance of RM450mil as at end-December 2020, plus sundry receivables of RM215mil.
“With the LDP’s sukuk to be fully repaid by April 2023 or FY24 (RM584mil outstanding as at end-December 2020), there is scope for higher dividends from Litrak especially from FY23 to help support Gamuda’s PSI (Penang South Islands) Island A project, under PFI (private finance initiative) funding, ” MaybankIB said.
“This assumes forward toll compensation claims are reimbursed on time, ” it added.
Litrak’s net gearing stood at 0.11 times as of end-2020.
Impacted by the MCO, the company’s net profit of RM163mil for the nine months to December 2020 was down 21% year-on-year (y-o-y), with turnover falling 25% y-o-y, implying a similar traffic downturn at the LDP.
During the period in review, various phases of MCO were implemented in the Klang Valley, resulting in volatility in traffic flows.
Litrak’s 9MFY21 net profit made up 82% of MaybankIB’s earlier FY21 net profit forecast. The brokerage noted the stronger-than-expected 9MFY21 earnings was the reason for of it raising its FY21 earnings forecast for Litrak by 6%. As of end-February 2021, LDP’s traffic was at 90% of pre-MCO level, while that of Sprint was at 70%.
“We now expect FY21 traffic at the LDP to fall 22% and Sprint-30%, with a recovery in FY22 by 18% and 25% respectively, ” MaybankIB said.