Perak Transit’s (PT) 9M17 core net profit increased by 50.5% yoy to RM20.6m, which constitutes 81% of our full-year 2017 estimate. Overall growth was supported by robust earnings growth from the group’s bus and petrol station operations, despite a subdued performance from its terminal operations. We adjust down our EPS by 9% in FY17-19E and DCF-derived 12-month TP to RM0.37 from RM0.40, reflecting the completed 1-for-10 bonus issue. Potential positive earnings surprise if there is any additional booking of project facilitation fees in 4Q17. Maintain BUY.

3Q17 Muted Due to Uneven Project Fees

PT’s total revenue increased by 7.0% yoy in 3Q17, tempered by a drop in revenue from the terminal operations. Revenue from its bus operations and petrol station operations increased, however, by 16.6% and 21.1% yoy respectively. Revenue from the terminal operations, which accounted for 36.8% of total revenue, dropped 8.5% yoy due to previous recognition of project facilitation fees in 3Q16. Revenue from project fees are, however, uneven in nature; a significant portion was recognised in 2Q17, explaining the sharp revenue decline qoq. Despite that, 9M17 revenue from the terminal operations grew at 31% yoy with petrol station and bus operations recording strong 26% and 33% yoy revenue growth respectively.

9M17: Revenue Up 30% Yoy, Net Profit Up 51% Yoy

Ytd, both revenue and profit have recorded strong yoy growth, driven by expansion across all three segments, as well as benefits from investment tax allowances. We are expecting the number of passengers arriving at Terminal AmanJaya to be higher in 2H17 as Movie Animation Park Studio (MAPS), which is located approximately 5 minutes away, commenced operations on 26th June 2017.

Maintain BUY

We maintain our Buy call with a reduced TP of RM0.37 (RM0.40 previously) based on DCF valuation adjusted for the completed 1-for-10 bonus issue. We continue to like PT 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 risks include a slowdown in construction of the Kampar terminal.

Source: Affin Hwang Research - 28 Nov 2017