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Litrak Capital Repayment, a nice way to suck money out



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Apr 10 2008
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Mahathir Mohamad, the former Prime Minister of Malaysia admitted his Cabinet’s stupidity about a year ago when he said the government has erred in signing the toll concession agreements. Early 2007 he said “This is one of thing that we need to correct. What you have is a cabinet which is not very knowledgeable all the time because it is not made up of experts but politicians (and) some politicians like myself can sometimes be stupid!”

Hence miraculously the government and sadly the public were held ransom by these highway operators. One of them is Lingkaran Trans Kota Holdings Bhd (KLSE: LITRAK, stock-code 6645) which operates the 40 km Damansara-Puchong highway, where the toll rose by 60 percent early 2007. Shareholders or Litrak will be paid RM1 for every share they have, in the form of 93 sen cash under a capital repayment exercise and another seven sen in a single-tier interim dividend for the year ended March 2008.

Litrak stock chartThe 93 sen per share repayment – involving a payout of up to RM462 million – will be done via a reduction of the company’s share capital and share premium. Gamuda Berhad’s (KLSE: GAMUDA, stock-code 5398) which owns 44.8 percent of Litrak also rose in tandem with Litrak shares. Where the heck does Litrak intends to raise this RM452 million?

Litrak has last Friday proposed the issuance of up to RM1.55 billion in Islamic debt papers under a sukuk programme or Islamic securities of which it received the approval from the Securities Commission (SC). The proceeds from the sukuk bond issue would fully retire Litrak’s existing debts (RM819 million as of Dec 2007) that were taken to fund the construction of the Damansara-Puchong Expressway (LDP). The tenure for the sukuk programme is 15 years.

Litrak Cash-CowAssuming the entire sukuk programme was drawn up Litrak would have maximum cash surplus of RM726 million. So, the RM462 million capital repayment exercise will be extracted from the RM726 million. However the capital repayment exercise is just a proposal at this moment but chances are high that the plan might proceed.

People can argue until the cow comes home that the agreement between the government and Litrak is lopsided and not done in the best interest of the people but the fact remains that Litrak is a money-making machine. What do you expect from a UMNO-linked company such as Litrak? And what can the people do even though there’s a claim that the company had actually recovered its construction cost three years into operation and whatever they’re getting thereafter are pure profit? Heck, then why raise RM1.55 billion in the name of wiping the construction cost?

Litrak RevenueLitrak EPSLitrak Pre-Tax ProfitWell, that’s the beauty of becoming the toll operators in Malaysia because the government will ensure you will reap all the profits for as long as possible. The agreement will remains confidential and Litrak can claim whatever they like. What better way to get some serious monies into your own pocket in the name of capital repayment exercise by issuing 15-years debts? Now fundamentally I don’t have to explain in length the handsome profits that this cash-cow is registering. Just look at the charts. Technically, the stock is trading above the support of RM3.70 with the immediate resistance of RM4.20 a share. So, you should know what to do with this stock.

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Comments

so we shall sell the share?

with the proposed $1 per share capital repayment, what do you think?

It’s ironic , the article conspicously reveals that this LITRAK is a blood-sucking company . Why bother to dabble with the shares , you’re seen as licking your own spit . Personally , i WILL not even get ‘touch’or get involved with this heinous company dealings . It’s called conscience pals .
peace !

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