Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on February 13, 2018

Perak Transit Bhd
(Feb 12, 27.5 sen)
Maintain buy with a target price (TP) of 46 sen:
We can be certain now that Perak Transit Bhd’s financial year 2017 (FY17) earnings, which are due to be announced this month, will be ended with a bang, as the rental for advertising space has been revised higher by approximately 7%, effective Sept 17, after the group converted some of the space within Terminal Amanjaya for digitised advertising activities. This will then be followed by another hike of approximately 5%, effective April 18, for the normal annual increment. All these came as surprises to us as the timing and the quantum of the rent escalation came in better than our expectations.

Besides, we also look forward to a prosperous FY18 as the company is affirmative that the rental rate for promotional space would be revised higher by approximately 15%, effective April 18. The hike is higher than our expectation of 5% as the group has managed to free up more net lettable areas by taking out those bus-ticketing booths within Terminal Amanjaya after successful implementation of a centralised ticketing system for express bus operations in Ipoh.

As far as the new terminal — Terminal Kampar — is concerned, we understand from management that construction works are progressing smoothly and the integrated terminal would likely open for express bus operations by end-2018. Meanwhile, the hotel, Cineplex and other food and beverage outlets would progressively open in the first half of 2019.

We raise our FY17 to FY19 earnings forecasts higher by 5% to 11% after changing our rental assumptions for advertising and promotional space within Terminal Amanjaya.

We raise our sum-of-parts (SOP) valuation to 52 sen per share (from 49 sen per share previously). Our TP is increased to 46 sen (from 44 sen previously) after pegging a 10% discount at the group’s SOP valuation. We continue to like the stock for its superior earnings quality where the bulk of the group’s earnings are recurring. Meanwhile, we foresee earnings expansion and TP upgrade post completion of Terminal Kampar at end-2018. We maintain our “buy” call. — TA Securities, Feb 12
 

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