Lately, I’ve received emails from two subscribers of DividendVault.com on Litrak (Lingkaran Trans Kota Holdings Bhd). The first email enquired about the straight fall in Litrak’s stock price from RM 5+ to about 50+ sen a share on 10 November 2022 as depicted below:
Source: Google Finance
The second email shared a related article from Simply Wall St and requested for a case study on Litrak. As I write, I’d discovered that 18 subscribers of ours, who had already claimed the Dividend Bonus of RM 300 from our Dividend Investing Challenge at DividendVault.com, had Litrak in their stock portfolios.
Of the 18 subscribers, the lowest and highest prices they had invested were RM 3.70 and RM 4.45 respectively. These shares were invested in 2020-2021. So, as a co-founder of DividendVault.com, I’ll like to first extend my congratulations to the 18 subscribers and yourself, if you do own some shares of Litrak.
Here, I like to pen down some background to Litrak and its recent chronology of events that led to its drop in stock price. Hence, here are 4 main things that you need to know about the recent fall in Litrak’s stock price.
Litrak owns two highway concessions in Malaysia. They include 100% interest in LDP and 50% interest in the Sprint Highway. In brief, Litrak’s earnings has grown from RM 86.0 million in 2010 to RM 261.9 million in 2020 before reporting back to back declines in 2021 and 2022. Its earnings in 2022 were impacted by a hike in depreciation & amortization cost, small losses in Sprint, and Cukai Makmur.
Source: Litrak’s Annual Reports
Earnings 2021 and 2022 represent Litrak’s profitability during COVID-19.
With positive operating cash flows, Litrak had been able to pay out dividends to its shareholders as follows:
Source: Litrak’s Annual Reports
DPS 2021 and 2022 represent Litrak’s dividend payments during COVID-19.
Based on the lowest and highest investment prices of RM 3.70 and RM 4.45 per share made by the 18 subscribers, their dividend yields (based on DPS of 25 sen in 2016-2020) would range between 5.62% and 6.76% per year. If let’s say, their basis were on DPS of 20 sen in 2021, their dividend yield expectations would be ranging from 4.49% to 5.41% per annum.
2. The Disposal of Litrak and Sprint Highway Concessions
On 14 July 2022, Litrak issued a circular on its disposal of 100% stake in LDP and 50% stake in Sprint to Amanat Lebuhraya Rakyat Bhd (ALR).
On 13 October 2022, Litrak received RM 3.069 billion from this disposal and the transaction was completed. On the same day, Litrak became a cash company. In this instance, it was listed as a PN 16 company. Litrak announced that it doesn’t intend to maintain its listing status on Bursa Malaysia and would be repaying its capital via special dividends (90%) and capital repayment (10%).
Link: PN 16 Announcement
3. Special Dividends of RM 4.57 a Share
On 25 November 2022, Litrak declared RM 4.57 a share in special dividends. Ex- Date to this dividends was set on 10 November 2022. As a result, this caused its stock price to fall by 90% from RM 5+ to 50 sen a share on 10 November 2022.
Link: Special Dividends
On 17 November 2022, the payment of this special dividends was completed. It means that for every 1,000 shares of Litrak owned, an investor would:
Before Special Dividends:
= 1,000 shares x RM 5+ a share
= RM 5,000+
After Special Dividends:
Investment Value + Cash Received
= (1,000 shares x 50+ sen) + (1,000 shares x RM 4.57)
= RM 500+ + RM 4,570
= RM 5,000+
Based on the lowest and highest investment prices of RM 3.70 and RM 4.45 per share made by the 18 subscribers, they realized a capital gain from the cash out of Litrak and Sprint and could still be holding onto their shares of 50 sen a share at the point of writing.
4. The Final Episode
As announced, Litrak does not wish to maintain its listing status on Bursa. Thus, investors now have two options for their Litrak’s shares. First, they could sell off their shares at the current price of RM 0.51 a share. In total, they could exit this investment at RM 5.08 a share (RM 4.57 + RM 0.51). They could choose to have their capital reinvested into other stocks that are income-productive.
Second, they can hold onto their shares and wait for Litrak’s announcements on how the remaining capital is to be repaid to them. Their final exit price could be RM 4.57 + RM X (pending for announcement).
I’m confident that my subscribers can decide on their own as to what is best for their Litrak’s shares. Here, both DividendVault.com and KCLau.com don’t intend to tell anyone what they should do with their stocks. So if you are an investor, it would be best for you to make up your own mind on your investments.
Once again, for my 18 subscribers, congrats to a ‘Good Buy’.
From this case study, we can see that stock investing is best if it is kept simple.
Litrak’s business model was easy to understand. Also, it has been profitable and has generated positive operating cash flows for many years prior to today. Thus by simply focusing on its fundamentals and valuation, investors had made gains out of their investments in Litrak. No speculation, prediction, technical analysis, or even investment advice needed to attain this feat.
If you like to replicate this feat for your own portfolio, earning regular dividends over the long-term, you may check our 1-Hour free training session as follows: