Perak Transit (PT) reported a strong set of 2Q17 results. Revenue was up 52.3% yoy and net profit grew >100% yoy for 2Q17. Revenue growth is supported by strong earnings performance from all three segments - terminal, bus and petrol station operations. 1H17’s net profit increased by 96.5% yoy to RM14m, which constitutes 55% of our full year 2017 estimates. With results broadly in line with our forecast, we make no changes to our earnings. Maintain BUY based on a DCF derived TP of RM0.40, providing upside potential of 26.1%.

2Q17 Net Profit Up >100% Yoy

PT’s total revenue increased sharply by 52.3% yoy in 2Q17, underpinned by (i) 90.7% increase in revenue from the terminal operations, (ii) 36.7% increase in revenue from bus operations and iii) 31.4% increase in revenue from petrol station operations. The terminal operations, which account for 40.7% of total revenue, increased significantly due to higher earnings contribution from the project facilitation segment (RM6.0m). The project facilitation segment is a high-yielding segment due to the low operational cost required.

2Q17: Revenue Up 5.3% Qoq, Net Profit Up 26.1% Qoq

On a sequential basis, revenue was slightly higher as earnings from project facilitation fee increased to RM6.0m compared to the preceding quarter of RM5.2m. PT’s bottom-line was also supported by a lower tax rate (-44.9% qoq) as the company is allowed to utilize the investment tax allowance to reduce tax expenses. We are expecting the number of passengers arriving at Terminal AmanJaya to grow correspondingly in 3Q and 4Q17 as Movie Animation Park Studio (MAPS), which is located approximately 5 minutes away from Terminal AmanJaya, commenced operations on 26th June 2017.

Maintain BUY

We maintain our Buy call with an unchanged TP of RM0.40 based on DCF, providing 26.1% upside. We continue to like Perak Transit for its (i) attractiveness as a monopoly business; (ii) strong earnings growth from its existing core businesses; and (iii) long-term potential from the upcoming terminal in Kampar. Key risk includes earnings disappointment following a slowdown in the construction of the upcoming Kampar terminal

Source: Affin Hwang Research - 25 Aug 2017