• We maintain BUY on Perak Transit (PTrans) with an unchanged fair value (FV) of RM1.54/share, pegged to a FY24F PE of 19x – 1 standard deviation above its 3-year FY17-FY19 pre-pandemic average of 16x. Our FV also reflects our unchanged 3-star ESG rating.

• We maintain our earnings estimates for now as PTrans’s 1HFY23 core net profit (CNP) of RM31mil (+7% YoY) came in slightly below our expectations but within consensus estimates, making up 44% of our FY23F earnings and 46% of street’s. As a comparison, 1HFY22 accounted for 49% of FY22 core earnings.

• QoQ, PTrans’s 2QFY23 revenue fell 12% while CNP rose 6%. The decline in contribution from project facilitation fee in 2QFY23 was mitigated by decreasing general and administrative expenses as well as lower effective tax rate of 20% in 2QFY23 vs. 29% in 1QFY23.

• Over the short-to-medium term, we anticipate continued growth in the group’s earnings backed by sustainable growth in the integrated public transportation terminal (IPTT) segment amid gradual post-pandemic footfall recovery coupled with sequential improvement in Kampar Putra Sentral’s occupancy rate that has a target to reach 70% by end-FY23F from 55% currently.

• The impending commencement of Bidor Sentral’s maiden earnings contribution in FY24F would provide further momentum to the group’s growth trajectory. As at 31 July 2023, the ongoing construction of Bidor Sentral has reached 75% and is on track to be completed by the end of FY23.

• Given that the stock is trading at an attractive FY24F PE of 13x vs. its 3-year FY17-19 pre-pandemic average of 16x, PTrans offers investors a good opportunity to own a defensive public infrastructure business. The group also aims to replicate its recurring business model in other states besides Perak to accelerate its growth.

Source: AmInvest Research - 17 Aug 2023