In February this year, I posted a piece recommending that we should take profit on PLUS & Litrak (here). That wasn't a good call. It was made in anticipation of higher interest rate regime which didn't quite pan out. While interest rate eas raised twice, the quantum was rather small and in an elevated stock market, investors seek out defensive stocks such as tolled road concession owners. Both stocks have seen better results due to increased traffic & higher toll rate (or compensation lieu of increased toll rate).
Recent Financial Results
From Table 1 below, you can see the q-o-q & y-o-y performance of PLUS & Litrak. Table 2 shows the valuation of these 2 stocks.
Table 1: PLUS & Litrak's last quarter results compared
Valuation
From Table 2 below, you can see that PLUS is trading below the target price of RM4.47 set by Kenanga (based on Discounted Cash Flow ['DCF'] hile Litrak is trading above the target price of RM3.02 set by ECMLibra (again based on DCF valuation method). The dividend yield of PLUS is about 4% while for Litrak is about 5%.
Table 2: PLUS & Litrak's valuation
Technical Outlook
PLUS broke above its 'horizontal' line at RM3.40-3.50 in July & made a high of RM4.24 on September 2. The target price for the current rally can be calculated by assuming that this move is equivalent to 1-time the distance travelled from the early low to the July breakout level. Based on this, the target price is about RM4.50.
Chart 1: PLUS's monthly chart as at Sept 1, 2010_log scale (Source: Tradesignum)
Interestingly, Litrak may have broken above the 'horizontal' line at RM3.20. Again, if we assumed that the current move is equivalent to the distance travelled from the recent low to the breakout point, then the target price is about RM4.90.
Table 2: Litrak's monthly chart as at Sept 1, 2010 (Source: Tradesignum)
Conclusion
Based on the above, PLUS & Litrak could be a trading BUY. My preference is for Litrak as the stock may have just achieved its breakout.
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