Monday, June 24th, 2019


‘Tax us more,’ US billionaires say

NEW YORK, June 24 — “Tax us more!” was the message today from about 20 super-wealthy Americans who urged presidential candidates to back higher taxes on the wealthiest to confront climate change and other priorities. “America has a moral,…

China demands FedEx account for undelivered Huawei package in new spat

BEIJING, June 24 — China today called on America’s FedEx to explain why a parcel from Huawei to the US went undelivered, in the second spat between the companies in less than a month. The ongoing tussle between the two firms comes as Beijing and…

US stocks edge up ahead of data, G20

NEW YORK, June 24 — Wall Street stocks opened modestly higher today ahead of a much-anticipated Group of 20 Summit, as well as key economic releases later in the week. Markets have been looking ahead to the G20 gathering in Japan at which US…

Bitcoin surges above US$11,000 thanks to Facebook’s currency plans

LONDON, June 24 — Bitcoin surged to a near 16-month high above US$11,000 today, overshadowing showings across stock, foreign exchange and commodity markets, with investors looking ahead to the week’s G20 summit. Bitcoin reached US$11,251.21,…

Italy could be given six months to address debt woes, reveal Commission minutes

BRUSSELS, June 24 — The European Commission could give Italy until January, instead of October, to make fiscal policy changes under an EU debt procedure, minutes of an EU meeting show, a move meant to avert a possible backlash from Rome’s…

Wall Street set to open higher with trade talks in focus

JUNE 24 — Wall Street’s main indexes were set to open slightly higher today, with investors pinning their hopes on a meeting between Presidents Donald Trump and Xi Jinping later this week to de-escalate a trade war that is damaging the global…

Litrak share price jumps on govt offer for highways

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.”

Gamuda’s toll concessions seem fairly valued: Analysts

PETALING JAYA: Analysts are now “more positive” on the takeover offer for the all highways owned by Gamuda Bhd as the offer price is deemed fair or higher than estimates.

However, Gamuda’s share price fell 26 sen or 6.8% to close at RM3.57 today with 33.62 million shares changing hands.

MIDF Research said Gamuda’s effective stakes carry an estimated total value of RM2.4 billion, equivalent to 95.6 sen a share.

“The consideration comprises cash, which we think could likely be disbursed in the form of an upfront payment that is followed by gradual instalments. Notably, we think the offer price was reasonable as the amount did not deviate much from our previous estimates at RM2.50 billion.

“Prior to the offer announcement, we viewed the potential takeover rather negatively. This was due to the possibility of the highways being valued at construction cost instead of discounted cash flow, which would likely ignore its economic value, hence undervaluing the asset. However, based on the offer price revealed, it was likely that the price was reached based on the market norms,” the research house said.

Kenanga Research is mildly positive on the offer price proposed by the government for the takeover of the highways given that it is slightly above its expectation by RM135.4 million or 4 sen per share.

“We believe that the positive variance could come from the extended concession period from Kesas which we previously did not include into our valuation.

“In terms of gearing, we would expect its net gearing to come down from 0.6 to 0.3 times upon completion of the sale of these highways,” the research house said in a report today.

While Kenanga is positive with the highway privatisation deal, it reiterated an “underperform” call on Gamuda with a higher target price of RM2.90 (from RM2.85) as it factors in the acquisition price differential.

“We believe that the positives have been fully factored in its recent share price rally. Year-to-date, the stock has risen by 64% and we believe that it is a good opportunity to sell on strength.”

MIDF noted that Gamuda’s cash position will be significantly enhanced upon successful acquisition of its four toll highways by the government, providing significant liquidity to its asset profile.

“We opine the potential cash proceeds could be utilised for other projects, which includes the funding its large infrastructure projects in Penang. At this juncture, we do not rule out the prospect of special dividend as to compensate for the loss in a stable income source going ahead.”

It added that on operational fronts, a significant loss in recurring income is inevitable, leaving the company with a rather cyclical business model which comprises construction and property.

MIDF understands that Gamuda’s management is zeroing in to acquire or invest in new “recurring income” businesses in the future. To recall, it estimated that the highway concessions (pending divestments) have generated about an average of RM200 million of stable earnings on annual basis. At pretax profit level, this would account for 25-30% of its total annual earnings.

“Taking the offer would leave a clear impact to its bottom lines, leaving a vacuum to its long-term recurring income.”

Fajarbaru awarded RM297m high-rise residential project

PETALING JAYA: Fajarbaru Builder Group Bhd has secured a RM297.54 million job for the main building works (Phase 1) of Duta Park Residences in Kuala Lumpur.

The proposed high-rise residential development is by Malton Bhd’s wholly owned subsidiary Malton Development Sdn Bhd.

The contract is to develop two tower blocks of high rise residential development, made up of 49 levels and 30 levels each, encompassing 572 and 268 units respectively. The construction work for Phase 1 of the development is expected to be completed within 36 months from its commencement.

Fajarbaru has additionally accepted to lock in a sum of RM108 million for the construction of phase 2, a tower block of 46 levels comprising 536 units. The award is subject to confirmation by Malton Development and the locked in price shall remain valid for a period of 12 months from the commencement of Phase 1.

The contract is expected to contribute positively to the earnings and net assets of the group from the financial year ending June 30, 2020 onwards.

Britain’s Lloyds bank freezes 8,000 offshore accounts

LONDON, June 24 — Britain’s Lloyds Banking Group has frozen 8,000 customer accounts under a wider crackdown on money-laundering, the lender announced today. LBG took action late last year after a change to money-laundering rules in Jersey, home…