Investment Highlights

• We maintain our forecasts and fair value of RM1.21 based on 15x its FY22F EPS, at a 30% discount to our FY22F target PE of 22x for Malaysia Airports, and adjusted for a 3% discount to reflect a 2-star ESG rating as appraised by us (Exhibit 4). We use Malaysia Airport as the valuation benchmark for Perak Transit as we see many similarities between this operator of modern public transport terminals and an airport operator. Maintain BUY.

• Perak Transit’s 1QFY21 net profit of RM13.4mil came in within expectations at 27% of both our full-year forecast and full-year consensus estimates.

• Its 1QFY21 turnover improved by 19% YoY, mainly due to higher contribution from the integrated public transport terminal (IPTT) operations. Its core net profit surged by a higher 56% thanks to cost containment efforts and lower finance cost.

• For 1QFY21, Perak Transit’s IPTT operations segment recorded a strong 55% YoY increase in revenue, backed by the new advertising income stream from Kampar Putra Sentral Terminal which opened in September 2020, as well as higher recognition of project facilitation fees.

• Meanwhile, revenues from petrol station operations declined by 16% YoY as the impact from MCO 2.0 appeared to be more severe than MCO 1.0 a year ago due to the longer duration of MCO 2.0. Bus operations also recorded an 18% YoY decline in revenues mainly due to more significant impact to traffic during MCO 2.0 vs. MCO 1.0 a year ago as well.

• Key takeaways from its analyst briefing on Tuesday are: 1. The company is confident that it will not be adversely affected by MCO 3.0, given the locked-in incomes from the IPTT segment, particularly the advertising incomes and project facilitation fees (both combined typically contribute to more than 95% of revenues from the terminals). To recap, the group has already renewed its advertising and promotional contracts for the year with flat rates YoY, and the next renewal will only be due in March 2022. Meanwhile, its project facilitation order backlog shall sustain for another year. It has thus far not provided rental support to its shop and kiosk tenants at the terminal. However, Perak Transit has not ruled out the possibility of reviewing it on a case-by case basis.

Source: AmInvest Research - 27 May 2021