Litrak (BUY, TP: MYR4.90, SP: MYR4.60): Dividends galore

What’s New

·         SPRINT’s and LDP’s toll rates were scheduled to increase by 32-47% in 1Jan 2015 and 1Jan 2016 respectively.

·         Although government will only make a decision on the actual toll rate hikes in Aug 2015, government has been compensating the delayed toll rates.

·         Meanwhile, traffic volumes would remain steady. Only expect slight short term negative impact from toll rate hike and the implementation of new public transport which we have already imputed into our traffic volumes growth estimates.

What’s Our View

·         With the scheduled toll rates increases and steady traffic volumes, Litrak’s FY3/17 net profit would double FY3/15’s.

·         With its strong earnings growth and resilient free cash flow generation, we see further upside to its dividends.

·         We estimate that Litrak could pay up to 35sen/sh (FY15 net dividends=20sen/sh) based on its debt covenants.  

·         Reiterate BUY with higher TP of MYR4.90 (+10% from MYR4.45), offering total return of 11% with further upside from dividends.

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