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Author: k3nthiew   |   Latest post: Mon, 29 Apr 2019, 11:34 AM

 

Water Tariff Hike And It's Result to PBA

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As we get the news about tariff hike for Penang of at least 20% (https://www.nst.com.my/news/nation/2019/01/448673/get-ready-pay-more-water-penang) and we did a profit forecast for PBA’s future earnings based on the assumption below:

  1. Volumes of water sold remain as water consumption from growing household has diminished by lower volume from existing users.
  2. A 10% increase on cost of sales and administrative expenses.
  3. Other operating income including bad debts recovered, gain on disposal income, interest income, miscellaneous income, rental income and income from reconnection fees and final connection charges to remain
  4. Zero tax payment because as at 30 September 2018, the unutilised reinvestment allowance of the Group available indefinitely for offsetting against future taxable profits amounted to RM605 million.

 

Quarter

REVENUE                        RM'000

COST OF SALES  RM'000

OTHER OPERATING INCOME  RM'000

ADMINISTATIVE EXP  RM'000

3Q18

84,058

-62,052

4,567

-17,365

2Q18

88,782

-60,362

6,716

-18,450

1Q18

85,935

-54,214

5,534

-20,543

3Q17

84,313

-55,617

8,152

-17,211

2Q17

78,364

-55,896

4,574

-16,458

1Q17

80,723

-53,567

4,390

-16,598

4Q16

79,680

-63,686

5,333

-19,141

3Q16

82,191

-52,004

7,968

-15,772

2Q16

83,972

-57,570

3,220

-15,651

1Q16

80,862

-53,031

3,265

-20,782

AVERAGE / Q

                                82,888

                        (56,800)

                             5,372

                          (17,797)

Operating Profit Before Tax / Q

 

 

 

                            13,663

Using the past 10 quarterly result (exclude 4Q2017) average as the base for our calculation, the average operating profit before tax per quarter is RM13, 663,000, which is RM54, 652,000 per annum.

 

NEW TARIFF +20%

                                99,465

                        (62,480)

                             5,372

                          (19,576)

O.Profit/Q

 

 

 

                            22,781

Quoting to Penang’s Chief Minister statement of minimum 20% increase, adding a 20% raise to revenue and anticipate a 10% increase on cost of sales and administrative expenses on future, PBA would able to generate RM22,781,000 per quarter or RM91,124,000p.a with the new tariff.

 

NEW TARIFF +25%

                              103,610

                        (62,480)

                             5,372

                          (19,576)

O.Profit/Q

 

 

 

                            26,926

As we get more encouraging with Penang has the lowest water tariff compare to national average (Rm0.32/1,000 litres VS Rm0.69/1,000 litres), we anticipate another situation with 25% increase on water tariff equal to Rm0.40/1,000 litres. As result, PBA earn RM26, 926,000 per quarter or RM107, 704,000 per annum.

Either scenario above will easily enable PBA to make RM90million/RM0.27 EPS on coming years.

Question is, if the above forecast came true, how it could benefit the minority shareholder?

Again, we are not trying to form any investment recommendation whether buy or sell on PBA’s shares but to share information and view.

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Labels: PBA

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Chart Stock Name Last Change Volume 
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