PETALING JAYA: Lingkaran Trans Kota Holdings Bhd’s (Litrak) share price jumped as much as 79 sen or 18.8% to a nine-month high of RM5.00 today on news that the government is offering RM2.75 billion to acquire its highways Lebuhraya Damansara Puchong (LDP) and Sprint, which is operated by subsidiary Sistem Penyuraian Trafik KL Barat Sdn Bhd.
The stock closed 70 sen or 16.63% higher at RM4.91, being the second top gainer on Bursa Malaysia with 3.71 million shares done.
Maybank IB Research said the Ministry of Finance’s (MoF) offer price translates into an effective equity value of RM2.75 billion (RM5.207 a share) for Litrak’s two highways, 8% above its equity discounted cash flow (DCF) value of RM2.55 billion.
“In an environment of tapering traffic growth and unlikely scenario of an extension of the concessions for both LDP and Sprint, we believe further upside for Litrak is capped. Our DCF-based target price is raised to RM5.21 (from RM3.90) to reflect the takeover value. With a potential upside of 24%, we tactically upgrade Litrak to a buy,“ MaybankIB said in a report today.
Also, it believes the LDP and Sprint concessions are unlikely to be extended beyond August 2030 (for LDP) and December 2034 (for Sprint).
Meanwhile, MIDF Research said from a shareholder’s perspective, it believes that the offer is appealing. The combined price tag of RM2.75 billion for both highway concessions translates into a price-to-book value (P/BV) of 2.96 times, a 24% premium to the 12-month trailing P/BV of 2.39 times.
On the outlook for Litrak, MIDF said the average weekday tollable traffic volume plying through LDP and Sprint has been on the downtrend since FY15 following the toll hike in October 2015.
“We expect growth in traffic volume to remain muted as the ridership of public transportation such especially LRT (Star and Putra), KTM Commuters and KVMRT Line 1 has been on an upward trajectory. Moreover, the introduction of the unlimited monthly pass called My100 and My50 will further encourage the use of public transportation in the near term,“ MIDF said in a report today.
In the longer term, the completion of KVMRT Line 2 in 2022 which connects Sungai Buloh, Serdang and Putrajaya combined with the possible reinstatement of KVMRT Line 3 will exacerbate the downside risk on tollable traffic volume.
“Specifically for Sprint, the Damansara Link runs parallel to the stretch of KVMRT Line 1 from Semantan Station to Taman Tun Dr Ismail station and we opine that the impact towards traffic volume will be more pronounced with the continuous improvement in public amenities and con-nectivity.”
Of the four stations competing directly with Damansara Link, Phileo Damansara and Pusat Damansara Station are equipped with park and ride facilities with over 500 car parking bays.
MIDF upgraded Litrak to “trading buy” with a revised target price of RM5.21 a share.
“Due to the attractive upside from the current price and our valuation, we advise investors to accept the offer as an exit strategy amid the lack of catalyst LDP and Sprint. As such, we upgrade our call on Litrak from neutral to trading buy with a target price of RM5.21 per share, reflecting the offer price by MOF Inc, on the basis that the deal will go through.”
