Lingkaran Trans Kota Holdings Berhad (KLSE:LITRAK) Analysts Just Cut Their EPS Forecasts Substantially

The analysts covering Lingkaran Trans Kota Holdings Berhad (KLSE:LITRAK) delivered a dose of negativity to shareholders today, by making a substantial revision to their statutory forecasts for this year. Both revenue and earnings per share (EPS) forecasts went under the knife, suggesting the analysts have soured majorly on the business.

After this downgrade, Lingkaran Trans Kota Holdings Berhad's dual analysts are now forecasting revenues of RM432m in 2022. This would be a decent 9.9% improvement in sales compared to the last 12 months. Statutory earnings per share are presumed to accumulate 6.2% to RM0.41. Previously, the analysts had been modelling revenues of RM483m and earnings per share (EPS) of RM0.46 in 2022. Indeed, we can see that the analysts are a lot more bearish about Lingkaran Trans Kota Holdings Berhad's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Lingkaran Trans Kota Holdings Berhad

Analysts made no major changes to their price target of RM4.77, suggesting the downgrades are not expected to have a long-term impact on Lingkaran Trans Kota Holdings Berhad's valuation. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values Lingkaran Trans Kota Holdings Berhad at RM4.90 per share, while the most bearish prices it at RM4.60. This is a very narrow spread of estimates, implying either that Lingkaran Trans Kota Holdings Berhad is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Of course, another way to look at these forecasts is to place them into context against the industry itself. For example, we noticed that Lingkaran Trans Kota Holdings Berhad's rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 9.9% growth to the end of 2022 on an annualised basis. That is well above its historical decline of 2.2% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 17% annually for the foreseeable future. So although Lingkaran Trans Kota Holdings Berhad's revenue growth is expected to improve, it is still expected to grow slower than the industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Lingkaran Trans Kota Holdings Berhad's revenues are expected to grow slower than the wider market. We're also surprised to see that the price target went unchanged. Still, deteriorating business conditions (assuming accurate forecasts!) can be a leading indicator for the stock price, so we wouldn't blame investors for being more cautious on Lingkaran Trans Kota Holdings Berhad after the downgrade.

Unfortunately, the earnings downgrade - if accurate - may also place pressure on Lingkaran Trans Kota Holdings Berhad's mountain of debt, which could lead to some belt tightening for shareholders. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

We also provide an overview of the Lingkaran Trans Kota Holdings Berhad Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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