Lingkaran Trans Kota Holdings Bhd (Litrak) could be considered a proxy for urbanisation simply because development in new areas will boost traffic volume on expressways. Besides, toll concessions are resilient in harsh economic climates.

The new developments sprouting up in the Klang Valley that have resulted in rising traffic volume has kept Litrak on a steady growth path.

It chalked up 18.2% compound annual growth rate (CAGR) for profit after tax (PAT) in the three financial years from March 31, 2015 (FY2015) to FY2017. It saw a record-high PAT of RM221.03 million in FY2017, compared with RM174.1 million in FY2016 and RM137.9 million in FY2015. This was mainly due to the scheduled toll hike at Lebuhraya Damansara – Puchong (LDP) on Jan 1, 2016, which was recognised for the full 12-month period in FY2017.

Earnings per share (EPS) swelled in tandem with the higher PAT, coming in slightly higher at 26.76 sen in FY2015 compared with 26.1 sen in FY2014. It grew further to 33.5 sen in FY2016 and 42.1 sen in FY2017.

Meanwhile, revenue was also on an upward trend over the three years. From RM373.9 million in FY2014, it rose to RM380.7 million in FY2015 and RM416.2 million in FY2016 before leaping to RM534.2 million in FY2017.

Given its steady cash flow, Litrak has been declaring dividends regularly. The concessionaire paid dividend per share of 30 sen in FY2015,

25 sen in FY2016 and 25 sen in FY2017.

Litrak’s growth in PAT was the highest among its other peers in the transportation and logistics sector (market capitalisation of RM1 billion or above as at March 31, 2018). Its peers had mixed performances during the three years under review.

Litrak owns two main toll concessions in the Klang Valley —LDP and Sprint Highway.

While the country’s high rate of car ownership is expected to support its earnings, Litrak foresees heightened regulatory risk after the May 9 general election. Pakatan Harapan’s GE14 election manifesto called for the abolishment of all tolled highway concessions in Malaysia but with fair compensation to be paid to the concessionaires.

“At the time of writing, there has been no formal communication from the government to the board or the management on this matter,” Litrak said in its latest annual report. “The group is confident that the provisions of the concession agreements, including each party’s rights accorded under the said agreements, will continue to be observed by both parties.”

“Competition from competing road alignments and public transport would affect the tollable traffic for both these highways of the group,” it highlighted.

The group’s revenue for FY2018, although remaining robust, dropped 1.9% to RM523.9 million from RM534.2 million in FY2017, due mainly to a slight reduction in tollable traffic volume. Litrak explained that the lower traffic volume was due to the opening of Duta-Ulu Kelang Expressway Phase 2 (DUKE 2) in November 2017 and migration of commuters from highways to public transport such as the Mass Rapid Transit (MRT) Line 1 and the Kelana Jaya and Ampang Light Rail Transit (LRT) extension lines.

MIDF Research’s analyst Fadhli Dzulkifly estimates that traffic on LDP and Sprint is expected to reduce by 3% and 4% due to the increased ridership on the MRT SBK Line and LRT lines.

To sustain future earnings, Litrak says it is keeping an eye out for viable new investments in the tolled highway industry — be it an acquisition of an existing tolled highway or a new alignment.