MTD Infra poised for re-rating
By Izwan Idris

MTD InfraPerdana Bhd (MTD Infra) is poised for a re-rating upwards, what with two lucrative concession assets making their full year contribution from the next fiscal period onwards.

“The stock is simply undervalued ? and under-researched,’’ Affin Research said in its recent focus on the company.

MTD Infra, through 100%-owned subsidiary MTD Prime Sdn Bhd, is the tolling concessionaire for two connecting highways – the KL-Karak highway and the East Coast Expressway 1 (ECE 1) – until 2032.

Analysts said with efforts to bring more development to the eastern corridor states, the two highways should benefit from increased traffic volume growth going forward.

The stock, however, has been on a protracted downtrend year-to-date, which may not necessarily reflect its business fundamentals.

At yesterday’s close of 64 sen, the stock was 40% lower than it was in December last year when it was re-listed following Dewina Bhd's reverse takeover exercise.

“The KL-Karak and ECE 1 concessions are the prized assets of the MTD Group,’’ Affin Research noted.

MTD Infra is 72%-owned by MTD Capital Bhd.

The research house said traffic volume had been growing at a compounded rate of 7% at the KL-Karak highway since tolling started in 1994.

In the meantime, MTD Infra would be entitled to toll collection revenue at the ECE 1 from Jan 1, 2005 onwards.

“MTD Infra's cash reserves are expected to build up more meaningfully from the fiscal period ending March 31, 2006, that being the first full year of tolling for the ECE 1,’’ it said.

Affin Research projected that MTD Infra's yearly cash flow – after debts and capital expenses – would average around RM33mil over FY05-08.

“In FY09, when its outstanding obligations are settled, we expect MTD Infra's net cash flow for the year to jump to RM130mil,’’ it added.

Both concessions are projected to generate total net cash flows amounting to RM7.15bil by 2032.

Affin has, on the other hand, put the value of the KL-Karak concession at RM908mil and the ECE 1 at RM474mil. This would add up to RM1.38bil, or equal to RM1.20 per MTD Infra share, based on its current paid-up capital of 1.148 billion shares.

“By applying a 30% discount to our realisable net asset value (RNAV), we arrived at a target price of 84 sen,’’ it said.

With stable recurring cash generating income, MTD Infra is also seen as a potential long-term dividend play.

“Assuming 70% of its annual cash flow will be distributed, we estimate gross yield of 4.6% in FY07 and at double-digit figures from FY09 after existing debts and obligations are met,'' the research house said.

On another note, MTD Infra is being consistently linked to two other existing toll concession operations within the MTD Group.

Analysts said there is the possibility that the MTD Group would inject the KL-Seremban and East West Link – now held by 74% owned Metacorp Bhd – into MTD Infra as part of an anticipated group-wide business streamlining process.

The market is expecting some development on this front by the end of the year, which should provide some excitement for counters under the MTD stable.

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