STOCK - MTDINFR

Stock : MTDINFR (9768)
Full Name : MTD Infraperdana Bhd
EPS (cents) : 2.71 (2006); 3.28 (2005)
NTA (RM) : 0.74
Price (RM) : 1.12
Div (RM): 0.02 (2006); 0.02 (2005)
PE : 41 (2006)
DY : 1.8%
Recommend : BUY

Looking at the price movement of LITRAK (6645) from RM2.9x to RM3.6x, apparently market has started to price in the effect of the toll hike that took place since 1st January 2007. However, there is another counter which is also the “beneficiary” seems being ignored by the market. Its share price has hardly moved even though our KLCI has broken its historically height – it is MTD Infraperdana (9768). I hold MTD Infraperdana and strongly believe there is much upside in this counter due to the following reasons:

• Toll concessionaire for KL-Karak Highway, East Coast Expressway 1, East-West Link Expressway and KL-Seremban Expressway.
• Increasing new residential areas in Cheras, potential 9MP projects in east coast and Visit Malaysia Year 2007. East-West Link Expressway is one of the most heavily used road toll in KL, providing the direct link between Cheras and PJ (Federal Highway). 9MP projects in east coast will contribute higher traffic volume in ECE1. The company will also benefit from the VMY2007, as more tourists will go to Genting Highlands using KL-Karak highway.
• Capital repayment of RM0.35. Based on the previous capital repayment experience, I will expect the RM0.35 capital repayment date to be formally announced in two month’s time.
• Heavy repair work expected to end by 2H of 2007. This will free up additional cash flow for future cash distribution.
• High borrowing? Not a major concern. Though the latest MTN issued in March 2007 balloons the company’s borrowing to RM1.2b, the operating cash flow of approximately RM100m per year is more than sufficient to cover (the concessionaire still has more than 20 years to go).
• MTD Capital needs capital to fund overseas projects, especially in those riskier countries such as Indonesia. Most bankers reluctant to give out loans on risky projects. One of the alternatives that MTD Capital can source capital will be having its subsidiary MTD Infraperdana to distribute cash. As a minority shareholder, we can benefit indirectly (refer to BJTOTO’s case).

The DY may looks low now, but as mentioned the management is capable to declare higher dividend due to the toll hike and upon the completion of heavy repair work. Since the downside is limited, I would recommend MTDINFRA a BUY at RM1.11