Key takeaways from Perak Transit’s 1Q24 results briefing:

• Rental income on the rise;

• Maiden contribution from Bidor Sentral in 2H24;

• Diesel rationalisation policy has muted impact.

No change to our earnings estimates. Maintain Buy on Ptrans with unchanged target price of RM1.03/share.

Rental income on the rise Recall,

Perak Transit achieved its record quarterly profit of RM17.7mn in 1Q24 on the back of lower tax expense. However, on the top line, the revenue fell 5.8% to RM44.6mn due to decline in project facilitation fee, which dropped by 36% YoY to RM7.8mn in 1Q24 (Figure 1). The decline was partially mitigated by steady rise in rentals of shop and kiosk from its two key integrated public transportation terminals (IPTT), i.e.: Terminal Meru Raya and Kampar Putra Sentral (KPS).

Looking forward, we expect the rental income to rise further as management has secured 2 key tenants to operate a ballroom and furniture and renovation showroom and warehouse at KPS, which are expected to generate additional 5% revenue. According to management, the rental from the furniture and renovation tenant will be based on fixed rental or profit-sharing model, whichever is higher.

Maiden contribution from Bidor Sentral in 2H24

Besides that, Bidor Sentral is expected to begin its maiden contribution from 2H24, pending the award of certificate of completion. We understand that this new integrated bus terminal has already secured tenants to occupy 54% of the total net lettable area. For future pipeline project, the group has obtained the develop approval to make way for the construction of Tronoh Sentral, spanning across 60.6 acres of land. According to management, the construction would likely begin in 2H24 and is targeted for completion by end 2026. This new terminal will allocate only 2% of the total build-up area of 480,000 sf for bus operations and the rest of commercial operations. The construction cost of estimated RM360mn has already been secured from the drawdown of Sukuk and management reiterates that fund raising is not needed.

Diesel rationalisation has muted impact

Current, Ptrans’ stage bus operations are using subsidised diesel and the diesel quota given to the company is sufficient. In the event the diesel price is adjusted or Ptrans is required to cover new routes or longer distance, it would likely qualify for fuel subsidy for running a public transport service and get additional diesel quota when the need arises. As such, we expect the diesel rationalisation policy will have muted impact on the group’s bottom line.

Forecast

No change to our FY24 and FY26 earnings projections.

Valuation

We maintain Perak Transit’s SOP valuation at RM1.03/share. We continue to like Ptrans for its stable earnings trend. At RM1.03, the implied valuation PE works out to ~15.5x, which we think is reasonable as its stable earnings are supported by 3 decent completed terminals and 2 pipeline projects. Maintain Buy

Source: TA Research - 27 May 2024