Stable Earnings From Core Business Operations

Perak Transit (PT)’s revenue in 1Q17 increased 38.2% yoy, underpinned by revenue growth across all three core segments – terminal operations, bus operations and petrol stations. 1Q17 net profit came in at RM6.2m (+41% yoy) – in line with expectations, constituting 24.3% of our full year forecast. We remain upbeat on the earnings prospect of PT, bolstered by an increase in number of passengers and advertisement fee in the next few quarters. Maintain BUY with a higher target price of RM0.34, providing 16.8% upside.

1Q17 Earnings Within Our Expectations

PT reported a 1Q17 revenue of RM26.8m (+38.2% yoy), due to stronger results from the terminal operations (+39.5%), bus operations (+43.3%) and petrol stations (+32.4%). 1Q17 net profit was up by 40.9% yoy, constituting 24.3% of our full year forecast.

1Q17 Results Weaker Compared to Preceding Quarter

Net profit was lower compared to preceding quarter, down by 21.3% qoq, due to lower project facilitation fee (1Q17: RM5.2m vs. 4Q16: RM6.9m). Traditionally, results in Q1 are weaker compared to Q3 and Q4, given higher tourists during the year-end holiday season.

All 19 SBST Routes and 45 Express Buses Are Fully Operational

PT’s bus operations segment increased the most (+9.9% qoq and +43.3% yoy) out of all three segments as all the 19 approved routes under the SBST programme and 45 express buses are running since March 2017.

Upbeat on Growth Prospects This Year

We remain upbeat on the earnings prospects for PT this year as we expect increase in number of tourist arrivals in conjunction with hosting of SEA Games and Visit Perak Year 2017. The opening of the new theme park, MAPS will also attract more tourists to Ipoh, thus help to drive earnings growth in the following quarters.

Maintain BUY, Raise Price Target to RM0.34

We maintain our BUY rating on PT. We roll forward our valuation horizon resulting in a higher target price of RM0.34 (based on an unchanged 14.0x). PT’s longer-term potential lies in its upcoming terminal in Kampar and attractiveness as a monopoly business. Earnings in the near term should remain strong for all three segments - terminal operations, bus operation services and petrol stations – on the back of booming tourism sector and weaker Ringgit.

Source: Affin Hwang Research - 25 May 2017