Key takeaways from Perak Transit’s 3Q24 results briefing:

• New tenants contributed to stable revenue growth,

• Terminal Kota Bharu updates, and

• New minimum wage effect.

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

New tenants contributed to stable revenue growth

Ptrans’ revenue has been growing steadily, surpassing RM50mn per quarter for the first time in 3Q24. Management attributes the revenue growth to additional income from rentals of shops and kiosks to new tenants as well as increased project facilitation fees to RM11.9mn from RM6.4mn in 3Q23. For this quarter, Terminal Meru Raya (TMR) chalked up an occupancy rate of 85% after securing a new tenant namely, iTA International TVET Academy, to take up 25% of the net leasable area (NLA). The occupancy rate is expected to increase further with a new supermarket operator Svetofor taking up approximately 19% of NLA in end-24.

Elsewhere, Kampar Putra Sentral (KPS) also recorded higher occupancy rate at 76% in Oct-24, with a game operator taking up level 4 for entertainment games such as roller stake, gel blaster and drift kart. In end-24, Svetofor will also open a supermarket at KPS.

For the newly completed Bidor Sentral, there was some start-up costs recognised in 3Q24 without the associated rental revenue, which would only begin in Oct-24. With regards to the incremental costs, management indicated that there was a one-off cost of RM4mn from drawing down RM300mn Sukuk Wakalah in 3Q24.

Terminal Kota Bharu Sentral (KBS) update

There is limited information on Terminal KBS as negotiations with the state government are still on-going. We understand that Ptrans would likely be the landowner and operator for this terminal. Given its proximity to the East Coast Rail Link project, we are confident about the potential passenger footfall for this terminal when it is built. As far as funding is concerned, Ptrans has established a RM1.5bn Sukuk Wakalah program, which has only drawn down RM300mn (for Seri Iskandar Sentral project) so far. We believe the outstanding Sukuk Wakalah is sufficient to finance existing pipeline and future projects, i.e., Seri Iskandar Sentral, Tronoh Sentral and KBS.

New minimum wage effect

According to management, Ptrans has 249 employees and about 52% of them are getting the minimum wage per month. So, the impact of hike in minimum wage to RM1,700/month next year is expected to cost an additional payroll of approximately RM300k per year, which is insignificant at 0.4% of FY25 profit.

Forecast

No change to our FY24 and FY26 earnings projections.

Valuation

We maintain Perak Transit’s SOP valuation at RM1.03/share (Figure 2). We continue to like Ptrans for its stable and sustainable earnings trend, emanating from increasing rental income. The Terminal KBS project would also serve to enhance and diversify its earnings which are concentrated in Perak. 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, 2 terminals under construction and 1 potential new terminal. Maintain Buy.

Source: TA Research - 20 Nov 2024