• Perak Transit’s 2020 earnings rose by 4.9% yoy to a record RM41.8m – in line with ours and consensus estimates
• The strong performance was attributable to favourable revenue mix from increased contribution from its high-margin IPTT segment (+27.1% yoy)
• We raise our 2021/22E earnings by 1.5-1.6% and maintain or BUY rating with an unchanged SOTP-derived TP of RM1.05

2020 Core Net Profit at RM41.8m (+4.9% Yoy) – Within Expectations

Perak Transit’s 2020 revenue declined 4.1% yoy to RM119.4m due to impact from the Movement Control Order (MCO), which affected contribution from its bus operation (-24% yoy to RM25.5m) and petrol station operation (-34.7% yoy to RM22.9m). However, the lower revenue was partially offset by a higher contribution from its Integrated Public Transport Terminal (IPTT) segment which improved 27.1% yoy to RM71m due to higher advertising and promotion (A&P) contribution from full leasing of A&P spaces at Terminal Kampar Putra, steady A&P income from Terminal Meru Raya and a higher project facilitation fee of RM39.6m (+34.8% yoy). Excluding one-off items, Perak Transit’s core net profit came in at a record RM41.8m (+4.9% yoy) – in-line with ours and consensus estimates. Higher core net profit was attributable to a favourable revenue mix, which lifted EBITDA margin up by 14.1ppt to 64.7% – higher contribution from high-margin IPTT segment.

Sequentially Stronger

On a sequential basis, Perak Transit’s revenue and net profit improved 0.7% and 10.3% qoq respectively, mainly attributable to a higher contribution from IPTT (+6.8% qoq) attributable to the leasing of A&P spaces at Terminal Kampar Putra which commenced in Sept-20. The higher contribution was however partially offset by lower contribution from its Petrol Station operation (-16.9% qoq) and bus operation (-1.9% qoq) due to the impact from reinforcement of the Conditional MCO in major states.

Maintain BUY With An Unchanged TP of RM1.05

We raise 2021/22E earnings by 1.5-1.6% as we take into account the potential earnings contribution from Perak Transit’s new venture into Terminal Management Services. We are comforted that the Group has secured its 2021 A&P tenants for Terminal Meru Raya and Terminal Kampar Putra with the same rental rates and continue to ensure good business relationships with its shops and kiosk tenants during the pandemic. We reiterate our BUY with an unchanged SOTP-derived TP of RM1.05. We continue to like Perak Transit for its robust earnings track record, with sustainable growth prospects.

Source: Affin Hwang Research - 24 Feb 2021