Gamuda & Litrak: Tolled Roads Takeover

Over the weekend, there were many reports that the Government is in talk to takeover some of the tolled roads and/or to reduce toll charges in the country. The tolled highways being highlighted as the first batch of concessions to be taken over are under Litrak (here). At this stage, there is no details on the takeover, such as pricing mechanism etc. The opposition parties are trying to paint the talk of tolled roads takeover as a political gimmick to win vote for the Semenyih by-election.

Right after GE14, the mere talk of a privatization of tolled roads had caused the share price of Litrak to plunge more than 30% from RM5.50 to RM3.70. I believe the negative sentiment has subsided, and the current round of rumor may have no impact on share price. Let's take a look at Litrak and Gamuda.

1) Litrak (RM4.60 @22/2/2019)

The share price is capped by a downtrend line, RR at RM4.70. Without any detail being disclosed, Litrak share price is likely to be capped by this downtrend line.


Chart 1: Litrak's weekly chart as at Feb 22, 2019 (Source: Malaysiastock.biz)

2) Gamuda (RM3.04 @22/2/2019)

This stock has rallied since the start of the year. It has gone above the downtrend line, RR at RM2.35. Its immediate resistance is at RM3.10. It will probably be driven higher by development in the negotiation on ECRL than takeover of Litrak's tolled road. If it can go above RM3.10, its next resistance will be at RM4.00 (with a short stop at RM3.50).


Chart 2: Gamuda's weekly chart as at Feb 22, 2019 (Source: Malaysiastock.biz)

I recommend a HOLD and a BUY ON WEAKNESS on both stocks.

Quick Update

As at 9:45 am, Litrak was down 32 sen to RM4.28 and Gamuda was down 29 sen to RM2.75. The sell-down is very strong- driven by fear and misconception. Even my fellow remisiers came to my room and told me, these 2 stocks are to crash. I reminded them that Malaysian economy is a free enterprise economy, with rules and laws. If the Government were to takeover these highways, the concession owners will be compensated. The question is only the quantum of the compensation. If the Government can simply takeover a private asset without compensation, we will be on the road to economic perdition.