Posted by dragon328 > 2024-02-29 10:02 | Report Abuse

@Bullstock888, yes I concur with your view above.

PBA's Q4 was dragged down by negative deferred tax, a 180 degree change from positive deferred tax in Q3. This is non cash, and I will just ignore them.

PBA recorded PBT of RM68.4m in 2023, this would have been higher if the ICPT surcharge rate was reduced for the whole year, but it came into effect only from July 2023.

Operating cashflows before working capital changes and capex amounted to RM112 million in 2023, which was very strong.

Post water tariff hike from 1st Feb 2024, PBA expects revenue to increase by RM86 million a year. Assuming operating costs remain unchanged, PBT will increase by RM86m.

I take a more conversative approach and assume operating costs to increase by 10% or RM27m in 2024, and so I expect PBT to jump by about RM60m to RM128 million.

Ignoring deferred tax effect, the normal income tax should be minimal as PBA has got enough capital allowance to offset against future taxable profit, so net profit will come to also about RM128 million or EPS of 39 sen.

PBA is a well run utility company and should enjoy PER of 15x (note Tenaga at 23x PER, PetGas at PER 20x), so PBA may be worth RM5.80 a share post water tariff hike.

Posted by KingKKK > 2024-02-29 10:15 | Report Abuse

https://klse.i3investor.com/web/blog/detail/bestStocks/2024-02-29-story-h-187465677-PBA_Cash_Flow_Strength_A_Deeper_Look_Beneath_the_Net_Loss_KingKKK

Posted by dollardollarbill > 2024-02-29 10:26 | Report Abuse

Looks like PBA is getting ready to further grow its renewable energy (solar and hydro) business.

4Q23
Note 10:

"On 5 January 2024, the Company increased its investment in its wholly-owned subsidiary, PBA Green Technology Sdn. Bhd. by RM1 million through the subscription of 1 million new shares at an issue price of RM1 each settled by way of cash."


PBA GREEN TECHNOLOGY

PBAHB incorporated a new 100% owned subsidiary called “PBA Green Technology Sdn Bhd” (PBAGT) on 12.12.2018. PBAGT was set up to take on projects in the fields of hydro and solar power. The idea is to generate electricity that may be used to offset or reduce the energy costs of PBAPP.

For the PBA Group, the main objectives for the renewable energy initiatives are to:

Explore renewable technology projects at PBAPP’s water supply installations, in support of the Vision 2030 aspiration of making Penang a “family-focused smart and green state that inspires the nation.”
Offset or reduce PBAPP’s energy costs by generating “green energy” that may be exported into the national grid.

Unlock the energy generation potential of Penang’s water supply installations, without compromising core water supply operations, safety and the environment.

https://pba.com.my/pba-group-of-companies/

Posted by Eagle77 > 2024-02-29 10:36 | Report Abuse

⬇️⬇️⬇️🩸🩸🩸☠️📣

Posted by super911 > 2024-02-29 10:38 | Report Abuse

I seen PBA revenue was quite stagnant from 2015 to 2022 (~330M). PBA wasn't allowed to raise tariff for that 7 years? Now new ruling allows them to raise tariff every 3 years?

Posted by jackson1688888 > 2024-02-29 10:39 | Report Abuse

Based on dragon328 view ,PBT around RM128 million , PAT RM 94.72million ( 24 % tax) , EPS only 29 Sen , I don’t think market will give high PE 15 as it’s just a small company , it only deserve up to PE 7-8 same as last time litrak so it only worth RM 2.10 -RM 2.40

Posted by jackson1688888 > 2024-02-29 10:42 | Report Abuse

The current price RM 1.9 already price in water traffik hike in 2024 , don’t chase high and should not be too optimistic of high PE 15 for this company

Posted by MrFox > 2024-02-29 10:44 | Report Abuse

so any1 can tell at what price shud we enter?

Posted by super911 > 2024-02-29 10:50 | Report Abuse

@jackson1688888 I guess it's better to value PBA with how much dividend they are paying out. If they can pay out half of their earning (15sen per share), it should be able to command a PE higher than 10.

Posted by ValueInvestor888 > 2024-02-29 10:51 | Report Abuse

Have been waiting for a good price today as missed early surge. Now i guess is a good time to buy...

Posted by EatCoconutCanWin > 2024-02-29 10:52 | Report Abuse

PBA next quarter will superb loss, as i seen there is huge cost that old pipe need to upgrade.

Posted by jackson1688888 > 2024-02-29 10:55 | Report Abuse

Hi@ super911 , I did rmb litrak also payout 6% dividend , but market only give PE 6-8 as the company is not growing, so if dividend is 15 Sen per share , PBA only worth RM 2.40 ,PE 8 , 6% dividend yield

Posted by dollardollarbill > 2024-02-29 10:55 | Report Abuse

This seems new, additional income of RM10m a year
4Q23 Note 6:
"The amount due from the State Government of RM88.76 million is receivable by eight equal instalments of RM10 million per year, followed by one final instalment of RM8.76 million, commencing from 2025."

Posted by icecool > 2024-02-29 11:01 | Report Abuse

QR boom! limit down ?

Posted by dragon328 > 2024-02-29 11:02 | Report Abuse

@jackson1688888, I don't think that because of a relatively smaller company like PBA, it does not deserve a PER of 15x.

For comparison, Ranhill which is comparable to PBA in size is trading at PER of over 25x.

Solarvest, a company smaller than PBA, is trading at PER of over 20x.

A lot of smaller companies are trading at much higher PER.

Posted by dragon328 > 2024-02-29 11:03 | Report Abuse

Even if I apply a lower PER of 10x, PBA should be worth RM3.90.

At 8x PER, PBA should be worth RM3.09

Posted by VincentTang > 2024-02-29 11:03 | Report Abuse

Big fish start sapu PBA

Posted by jackson1688888 > 2024-02-29 11:06 | Report Abuse

@dragon328 , market only give high PE for growth company , i did agree with your high PE 15 for ytlp & YTL as there are still a lot upcoming project , for PBA I didn’t see any growth in next 2 year as water traffik hike only revised next 3 year

Posted by ValueInvestor888 > 2024-02-29 11:10 | Report Abuse

water usage and demand will increase due to growth in industry and especially data centre.
Water stocks have growth story as well besides tariff hike.

Posted by Chong3710 > 2024-02-29 11:18 | Report Abuse

Can keep this if have spare money. Specially for company with lots of cash on hand

Posted by VincentTang > 2024-02-29 11:22 | Report Abuse

Bought PBA 1000 lots at 1.93

Posted by dragon328 > 2024-02-29 11:26 | Report Abuse

@jackson1688888, you can argue that PER of 15x should only apply to growth stocks, but I can argue that PBA can be considered a growth stock as it has just secured a substantial hike in water tariffs, and hence its earnings for 2024 and 2025 will grow substantially, then 2026 earnings will grow organically based on water consumption growth in Penang.

Come 2027, it can apply for another round of water tariff hike as its average water tariff will still be among the cheapest in Peninsular Malaysia. Earnings will grow further when it secures another water tariff hike in 2027. Then by 2030, there will be another round of water tariff hike review. Not a growth stock?

Even the assumption of 15x PER only for growth stocks is also not entirely true. Take a look at Tenaga and PetGas, both earnings will only grow organically based on electricity demand and gas consumption in Peninsular. Why are they trading at PER of over 20x?

Posted by csan > 2024-02-29 11:31 | Report Abuse

well i guess it takes actual reporting to make many fools realise that pba is not as sexy as it seems.

This was my comment 1 month ago:

Penang Chief Minister Chow Kon Yeow, meanwhile, said PBAPP is expected to gain RM86 million a year with the tariff adjustment. "However, PBAPP still has to bear an estimated subsidy of RM78 million for the same period".

i am quite certain investors are making a mistake thinking pba earnings will fly very high. but anyway, congratulations to those who made money. if i were you, i'll sell everything tomorrow on opening. don't be the fool who chase high.

Posted by dollardollarbill > 2024-02-29 11:32 | Report Abuse

@dragon328
For non-domestic sector, there will be another round of tariff hike in 2026.

Posted by dragon328 > 2024-02-29 11:38 | Report Abuse

In Q4 statement, PBA stated that it had about RM170m of capital allowance as of 31 Dec 2023 to set off against future taxable profits. So this will be enough to set off against most of the taxable profit in 2024 so the effective tax expense in 2024 will be very low like in 2023 when income tax expense was only RM4.7 million (cash tax payment was also about RM4.7m).

On deferred tax, PBA claimed positive deferred tax of RM44m in 2022 then it reversed some of it in 2023 and recognised negative deferred tax charge of RM34m. As a result, deferred tax liabilities increased from RM99m as of 31 Dec 2022 to RM128m as of 31 Dec 2023.

I am not sure how this deferred tax charge will affect PBA net profit going forward. Any accountant here who can advise?

Posted by gohkimhock > 2024-02-29 11:53 | Report Abuse

okay, let's make this very clear first.

deferred tax liability is not a current liability.
deferred tax liability is not a debt.
deferred tax liability is a long term liability which is payable in future. Bcos of the timing, the tax was accrued when it was supposed to be paid.

Posted by jackson1688888 > 2024-02-29 11:59 | Report Abuse

@dragon328,
1) both tenaga & Petgas are in top 30 MISC index , those local institutions and foreign fund have to hold them.
2) Tenaga and petgas can develop their business to the world , but PBA only in Penang. The growth is limited
3) Tenaga & Petgas pay out high dividend in past few years which give investor confident , but PBA didn’t
4) Petgas & tenaga have well story of renewable energy in future , but PBA just a convention water supply
That why I don’t think PBA will reserve PE more than 8

Posted by Tanleechoo > 2024-02-29 12:22 | Report Abuse

This utility business …if water tariff up ..next Dap will loss the votes in pg，

Posted by Income > 2024-02-29 12:59 | Report Abuse

How? Buy or bye?

Posted by Erudite > 2024-02-29 13:58 | Report Abuse

Today is 29th Feb. Every 4 years once. Very rare times.

Sometimes the market irrationality gives rare opportunities to investors who can see through the noises. Those who do will benefit and do well.

Posted by dragon328 > 2024-02-29 14:26 | Report Abuse

True that PBA has not gained enough investor confidence as its earnings record in the past few years is not consistent, and dividend so far has not been very good given the low water tariffs.

I believe after the water tariff is revised up and PBA starts to deliver solid earnings for 2 or 3 quarters then investors will have more confidence and give a higher PER.

It was the same case as in YTL Power. It was trading at unjustifiably low valuation of 5x PER last year, when most analysts played down on its prospects. But now analysts have to upgrade their target price and give a fairer PER of 10x to 15x, after YTLP delivered 3 consecutive of strong earnings.

I think once PBA delivers a good improved profit for Mar 2024 and reinforces the strong earnings in June 2024, then investors will have a different look at it.

Posted by dragon328 > 2024-02-29 14:28 | Report Abuse

There is no point arguing it at this moment after it just delivered a weak set of results.

Lets see in 3 months time.

Posted by EatCoconutCanWin > 2024-02-29 14:39 | Report Abuse

pba should mou with nvidia, AI to use robot repair pipe

Posted by Income > 2024-02-29 14:49 | Report Abuse

Pba got Nvidia help? Talk kok you!

Posted by Income > 2024-02-29 14:51 | Report Abuse

Dropped 50 sen. Only waiting for recovery.❤️‍🩹 no need to Scare. Penang Gov will help Pba lah. No worries

Posted by EatCoconutCanWin > 2024-02-29 15:20 | Report Abuse

maley company can't sustain growth, they kerja sambil lawa.

Posted by Ytl2023 > 2024-02-29 15:27 | Report Abuse

Really big drop. So. Tempted to go in rm2.26

Posted by xiaoeh > 2024-02-29 15:29 | Report Abuse

Mrfox!!!
remember?

Posted by Justaboylearning > 2024-02-29 16:23 | Report Abuse

Mr fox like his name, just a sly fox hahah

Jokes aside, it seems that KingKKK revised his TP from 2.50 to 3.55 to 2.60

Still has 35% upside for now.

Posted by goldenhope > 2024-02-29 16:29 | Report Abuse

Don't worry, PBA will deliver good profit next qtr, see Velesto also always say good, announced few qtr dissapointed result but finally deliver good profit recently.

Posted by Ravetidus > 2024-02-29 16:46 | Report Abuse

The deferred tax asset is expensed to PL upon utilisation of reinvestment allowance to offset current year taxable profits. They should at least compute it each quarter instead of charging it all in one quarter.

Posted by Invest_888 > 2024-02-29 21:00 | Report Abuse

In my opinion, PBA won't face any financial problem at all bcs it is belong ot Penang government. But the Penang government won't allow this company to earn too much money bcs PBA is equal to Penang People vote.

Posted by NatsukoMishima > 2024-03-01 08:35 | Report Abuse

Let ranhill take over this poor service company , always no water supply !

Posted by Justaboylearning > 2024-03-01 09:50 | Report Abuse

My remisier said this is worth 1.20-1.40 only . Cut loss cut loss

Posted by Bullstocks888 > 2024-03-01 10:10 | Report Abuse

@dragon328, I agreed with your conclusion that PBA is worth RM5.80. It could be worth more if you use Ranhill PE of 25x.

There were many haters when you recommended YTL Power below RM1. Look where is YTL Power today! Your track record is proven! Not sure about anyone who will listen to his remisier. 2024 surely a record year for PBA and YTL Power. HODL!

Posted by dragon328 > 1 day ago | Report Abuse

@Bullstock888, yes I concur with your view above.

PBA's Q4 was dragged down by negative deferred tax, a 180 degree change from positive deferred tax in Q3. This is non cash, and I will just ignore them.

PBA recorded PBT of RM68.4m in 2023, this would have been higher if the ICPT surcharge rate was reduced for the whole year, but it came into effect only from July 2023.

Operating cashflows before working capital changes and capex amounted to RM112 million in 2023, which was very strong.

Post water tariff hike from 1st Feb 2024, PBA expects revenue to increase by RM86 million a year. Assuming operating costs remain unchanged, PBT will increase by RM86m.

I take a more conversative approach and assume operating costs to increase by 10% or RM27m in 2024, and so I expect PBT to jump by about RM60m to RM128 million.

Ignoring deferred tax effect, the normal income tax should be minimal as PBA has got enough capital allowance to offset against future taxable profit, so net profit will come to also about RM128 million or EPS of 39 sen.

PBA is a well run utility company and should enjoy PER of 15x (note Tenaga at 23x PER, PetGas at PER 20x), so PBA may be worth RM5.80 a share post water tariff hike.

Posted by Icon 888 > 2024-03-01 10:12 | Report Abuse

Habis goreng dah

Posted by Bullstocks888 > 2024-03-01 10:17 | Report Abuse

@dollardolarbill, thanks for your good insights! PBA cash flows are so much higher than earnings. Dividends also increase to 3.5 sen. Hopefully PBA can pay higher dividend next year with higher earnings.

Posted by dollardollarbill > 1 day ago | Report Abuse

@Bullstocks888

The income statement can mask/hide the real earnings of PBA, but not in the Cash Flow statement. Operating cash flow before working capital changes is RM128.5m in 2023 vs. RM87.4m in 2022. Net OCF RM179m in 2023 vs. RM103m in 2022.

The deferred tax expense of RM25.7m is a non-cash item and might potentially be reversed in the upcoming quarters.

The tariff hike for domestic users (and other categories) was just implemented on 1 Feb 2024, not in 4Q23. So, the RM86m increase in revenue that PBA mentioned will only be reflected from 1Q24 onwards.

While costs may have increased a bit in 4Q, these cost increases can be passed on in the next tariff adjustments in 2026 and 2027 for non-domestic and domestic users. Consequently, earnings are expected to continue rising after the adjustments.

I will continue to hold PBA as I believe in my long-term thesis, rather than focusing on the next quarter or two. In investing, one shouldn't feel pressured to chase returns for the next few months. Taking the longer-term view and focusing on the bigger picture is how great returns are generated.

Posted by Justaboylearning > 2024-03-01 12:54 | Report Abuse

We will see how it goes in one year

Posted by Erudite > 2024-03-01 16:18 | Report Abuse

no nd to wait 1 yr, next 2-3 quarter will see the revised tariff effects. Quite simple... Only thing to argue is the TP... Prospects intact....

Posted by Felix888999 > 2024-03-02 16:34 | Report Abuse

Wow price dropped like water fall, why ahh?