Actually I am quite surprised that PBA trade volume increased to 293.9k units yesterday 31-1-2023 with gain of 2.5 cents. Some readers must be impressed by your rough estimate on PBA 2023 earning of 20-25c eps. :)
@k3nthiew Per PBA-AR2021 page 101 of 256, trade consumption account for 36% in term of total water volume (not revenue). Your rough calculation, (RM120m pa x 63% = RM75.6m p.a) which is based on revenue is therefore incorrect.
k3nthiew estimation of 40 - 60 millions in revenue increase per year is correct. Per PBA-AR2021 page 101 of 256, trade consumption account for 36% in term of total water volume. Since the tariff for trade consumption is much higher than for domestic consumption, the actual revenue from trade consumption is much higher than half the total revenue of PBA. Taking the revenue of PBA for last 4 quarters of 340M, the revenue from trade consumption is higher than 170M (based on 50% of total revenue). Since the trade water tariff had increased by more than 25%, the increase in revenue will be 25% of 170M = 42.5M minimum. This figure is very conservative because these figure do not include the China mainland tourists which are expected to return in millions (per normal year) to Penang this year which will increase the trade water consumption very significantly.
Under Lim Guan Eng (LGE), Penang water tariff is purposely keep low to hit out on BN controlled states claiming how efficient is Pakatan Harapan states. Even the high water tariff in Selangor was blamed on former BN government. Now Pakatan is the government of the day. The reason to keep Penang water tariff very low is no longer there. Even if the water tariff is increased 25% (from RM0.32 to RM0.40), it is still much lower than the next lowest water tariff of RM0.52 of Terengganu. With the significant increase in Penang water tariff, the profit of PBA will soar and the dividen payout will increase significantly.For the long suffering PBA shareholder, this is the moment long waited for. Just have to wait a little longer (within 2 months ?).
Finally Penang Chief Minister Chow Kon Yeow is doing their right thing by allowing Penang water tariffs to increase significantly. Penang is having water tariff of RM0.32 per cu.m. now compared to RM0.67 for Kedah, RM0.73 for Perak, RM0.77 for Selangor and RM1.05 for Johore. (source: Perbadanan Bekalan Air Pulau Pinang Sdn Bhd-Water Tariff Project 2014). The extreme low Penang water is making it funny compared to other Pakatan Harapan controlled states as mentioned above. To close the tariff gap between states, the easiest is to raise the water tariff in Penang significantly. Penang people will have little to complaint about any water tariff increase when looking at water tariff in other states.
MSM is under-value now. For quarter ending Dec 2018, its profit will increase very significantly due to low raw sugar price at middle of year 2018. MSM need to keep stock of about 3 months of sugar per Malaysia regulator requirement. So there is a lag of about six months (due to freight, storage , processing) after low raw sugar price before profit appear in the quarterly finance result.
Alex, previous years PBA is a poor performer. This year PBA raise from RM1.14 on 3rd Jan2017 to RM1.28 on 25th May 2017. This year the share price has increased 14 divided by 114 = 12.2% in less than half year! The price of RM1.28 has not fully include the PBA revenue increase due to WCS increase yet. There is still pretty of room up for PBA this year 2017.
flairline, actually Calvin methods of evaluating shares are quite standard practice.His evaluation based on P/E is on the low side because he did not include the 3 cents increase in earning per share when the WCS is increased to RM1.00 within the next few months. We have NO reason to believe that National Water Service Commission (SPAN) will reject the application because SPAN will also earn more when the revenue of PBA increases. The expected earning per share is (12.76+3)=15.76 resulting in share price of RM1.57 if based on a very conservative P/E of 10.
Thanks for your feedback Calvin Tan. Due to the previous bad record of PBA in term of share price increase, many investors are still struck with the mindset that PBA will not perform well. The cash flow of PBA has improves significantly in 2016 and will continue to improve in 2017 and beyond due to the last water tariff increase and the pending WCS increase. Furthermore many of the PBA infrastructure projects was completed in 2015 and 2016 resulting in big water safety margin for PBA. Those who listen to your PBA recommendation will be the winners eventually.
Actually the management can still pay themselves salaries and director fees after GCE delisted. They will be directors of GCE which will then be 100% owned subsidiary of Hotel Grand Central Limited, Singapore. The reasoning for delisting is that they can have 100% of GCE (at RM0.80/share) plus RM 20M cash without having to consider for minority shareholders and all the listing requirement (which cost money also). After all they already own 72.6% of GCE.
Even with the the lowest water tariff in Malaysia, PBA is very profitable. The biggest factor that can affects PBA price is the decision of the BOARD of PBA which consists mostly of politician appointees. These politician appointee do not have the interest of PBA minority shareholder as their main concern. They can suck out money from PBA legally via "water intake Fees to State Government of Penang (about RM 20 millions/year) " and other creative methods. They can also has very high capital expenditure (in the past) eventhrough PBA has very high water safety margin and low NRW (non-revenue water). Although cash flow of PBA has improved since the increase in water tariff, the market is NOT expecting an increase in dividen. The is why PBA is now trade at 3.75/3.3 = RM 1.14 per share (as on 23th Sept), where 3.75 cents represents dividen rate/share and 3.3 cents represent fixed deposite rate of banks.
Dear lukehan, the biggest factor that can affects PBA price is the decision of the BOARD of PBA which consists mostly of politician appointees. These politician appointee do not have the interest of PBA minority shareholder as their main concern. They can suck out money from PBA legally via "water intake Fees to State Government of Penang" and other creative methods. They can also has very high capital expenditure (in the past) eventhrough PBA has very high water safety margin and low NRW (non-revenue water). Although cash flow of PBA has improved since the increase in water tariff, the market is NOT expecting an increase in dividen. The is why PBA is now trade at 3.75/3.3 = RM 1.14 per share , where 3.75 cents represents dividen rate/share and 3.3 cents represent fixed deposite rate of banks.
Interesting comments from calvintaneng. How can PBA minority shareholders ask for higher dividen payout? The present dividen payout as percentage of PBA earning per share is still relatively low for a mature utility company. If PBA can payout 40% to 50% of its annual earning (after tax) as dividen, the share price of PBA will shoot up.
Hi yoltze, thanks for your explaination on how the high figure of RM 61.5 millions for total 3 years is derived. I agree with you that it is most probably based on 10% increase in water usage per year. There are many new/ongoing projects in Penang which may have cause PBA management to be over optimistic. If the projection by PBA management is correct, then the earning per share of PBA would be revised upward by 10% each year resulting in 13.09sens (2016), 14.40sens (2017) and 15.84sens(2018).
hi fayeTan, I did read your article at /genzinvestor/92682,jsp earlier.PBA drops from RM1.21 to RM1.10 (from 7th March to 9th March).The article was written to determine whether there are over-reacting to the 100% increase in 'Water Intake Fees'by Penang government.The increase in 'Water Intake Fees' reduces PBA expected earning in 2016 from 14.9 sens to 11.9 sens.The market was correct to sell down PBA by 5% per your article at http://klse.i3investor.com/blogs/genzinvestor/92682.jsp
The capital expenditure of PBA will drop very significant this year specially with the delay in Mengkuang Dam. The capital expenditure of more averagely more than RM 80 millions yearly for the last 5 years has given PBA the highest treated water reserve margins in the country. There is just no reason why capital expenditure will be high in the next few years. PBA at yesterday last traded value of RM1.22 is definately a excellent buy. With lower capital expenditure, the dividen increase of PBA will surely lift the share price up. However will have to wait patiently for the next 3 months to see the 1st fruit.
I believe some investors was dissappointed that PBA does not announce a bigger dividen. The cash flow of PBA is still poor with RM109 millions new purchase of plant and equipment for financial year ending Dec2015. However the cash flow of PBA will improve significantly in year 2016 because the contracted capital expenditure has drop from RM 81 millions (year 2015) to RM 57 millions for year 2016. Hopefully this will translate into better dividen for finance year 2016 from the dividen rate of 3.75% per share for financial year 2015.