PBA announced its 2nd Quarter 2024 earnings yesterday. 

Share price surge this morning.

The net profit of RM55.2 million is the new RECORD for the company. 

What are the key points you must know about PBA today?

Positive:

1. Q2 was a strong turnaround with EPS turned to +16.68 sen from 0.99 sen loss last year 2023 in Q2. Reason for earnings improvement is due to higher water tariffs for domestic and other categories from 1-Feb-2024.

​2. Revenue jumped 44% YoY to RM150 million :

3. Operating profit surged 416% YoY to RM57.8 million.

4. On a QoQ basis, net profit +283% to RM55.2 million.

Negatives:

1. Admin expenses increased 14% YoY in Q2 2024.

What I think?

1. Q2 earnings is a positive surprise to the market.

2. Earnings improvement trend should continue in Q3 as water usage increase in tandem with better economy. This is because factory likely use more water due to higher demand for various products.

3. 2024 earnings should improve significantly than 2023 due to higher sales volume and better tariffs.

4. Long-term outlook remains good. Recall that the tariff review now takes place every 3 years, and water usage always increases year after year.

5. The new intrinsic value is RM2.80 from RM2.60. This translates to a PE ratio of 10x. Given the estimated 2024 EPS of 28 sen, this calculation results in a value of RM2.80.