Despite a pandemic-ravaged FY20, Perak Transit achieved a record-high profit of RM42m on the back of greater IPTT contributions. The Group has also secured a new TMS contract to manage Terminal Bas Shahab Perdana in Kedah, with PAT margins of c.60%. With growing recurring revenue, the Group announced quarterly dividends commitment at a minimum 35% payout. We increase FY21E CNP by 3% to RM49m and introduce FY22E CNP of RM52m. FY21E/FY22E DPS are 2.71 sen/2.88 sen. Reiterate OUTPERFORM with higher DCF-driven TP of RM1.15, in line with 4-year mean PER of 14x.

Solid FY20. FY20 CNP of RM42m exceeded our/consensus expectation of RM39m/RM40m. FY20 revenue of RM119m also exceeded our/consensus forecast of RM113m/RM116m. The deviation was mainly due to strongerthan-expected IPTT growth. FY20 DPS of 2.75 sen came below our expectation of 3.14 sen. The Group, however, paid a special dividend of 0.69 sen in 1HFY20 on top of three interim dividends. The Group also declared the first interim DPS of 0.8 sen for FY21.

Quarterly dividends with minimum 35% payout ratio. Moving forward, the Group is committed to paying quarterly dividends with a minimum payout ratio of 35%. (Refer overleaf)

YoY, revenue fell 4% due to MCO’s impact on the Group’s bus and petrol station operations. However, the Group achieved a record high CNP in a pandemic-ravaged year as CNP rose 5%. Profit rose as revenue fell because the bus and petrol stations shrank as a proportion of total revenue to 41% (from 55%). The Group’s high-margin IPTT segment burgeoned to 59% (from 45%) as revenue remained resilient and Terminal Kampar Putra (TKP) started contributing in September 2020. Consequently, CNP margin rose from 32% to 35%. PBT rose by 20% but was offset by a significantly higher tax rate of 14% (vs. 2% in FY19).

QoQ, revenue only rose 1% despite being the first full quarter with Terminal Kampar Putra’s contribution as revenue from petrol station operations fell 17% due to lower sales volume and fuel price. However, CNP rose 10% thanks to higher contributions from the IPTT segment.

Terminal Bas Shahab Perdana (TBSP). The Group has secured its second terminal management services (TMS) contract to manage TBSP in Kedah. Unlike the Terminal Sentral Kuantan agreement, this TBSP contract allows the Group to collect all commercial revenue in TBSP. With an initial investment cost of RM6.5m spread over 15 years and minimal operating costs, we expect this contract to deliver c.60% PAT margins. With TBSP FY22E revenue of RM2.2m, a PAT contribution of RM1.3m makes up 2.5% of FY22E CNP of RM52m. (Refer overleaf for details on TBSP)

Post results, we increase FY21E CNP by 3% to RM49.1m (from RM47.8m) and DPS to 2.71 sen (from 2.51 sen). We also introduce FY22E CNP of RM52.2m and DPS of 2.88 sen, yielding 3.3%.

Reiterate OUTPERFORM and increase DCF-driven TP to RM1.15 (from RM1.08). We have made slight adjustments to our WACC assumption (7% from 7.7%), while our terminal growth rate assumption of 2% remains intact. Based on our FY22E CNP of RM52.2m, the current share price of RM0.88 implies a forward PER of 10.7x, below its 4-year average of 14x PER. Our TP-implied PER is at mean of 14x, which is conservative in our view as the Group continues to hit the right notes.

Source: Kenanga Research - 24 Feb 2021