Perak Transit FY18 core earnings seen expanding 19.8% further

This article first appeared in The Edge Financial Daily, on October 13, 2017.
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Perak Transit Bhd
(Oct 12, 29 sen)
Initiate coverage with buy and a target price (TP) of 44 sen:
We initiate coverage of Perak Transit Bhd with a “buy” recommendation. Our TP of 44 sen per share is based on a 10% discount to the group’s revalued net asset value of 49 sen per share.  

Perak Transit is principally involved in operations of integrated public transportation terminals and provision of public bus services. It is also involved in the petrol sales business. 

It has a proven business model, viable future expansion and sound financial planning. 

We expect Perak Transit’s core earnings to expand further by 19.8% for financial year 2018 (FY18) from an estimated core profit of RM25.8 million for FY17 before hitting another record high of RM44.8 million in FY19 and RM48.9 million in FY20.

Our earnings projections are premised on the assumptions that: i) increases in A&P rental in Terminal Amanjaya by 3% to 5% for FY18 to FY20; ii) Terminal Kampar to contribute A&P rental income of RM11.4 million and RM12.6 million for FY19 and FY20 respectively; iii) we assume occupancy rates of 50% and 60% and rental rates of RM5 to RM5.15 per sq ft for FY19 to FY20 for Terminal Kampar; iv) project facilitation fees of RM15 million each for FY18, FY19 and FY20; v) effective tax rates of 14% for FY18 and 10% for FY19 and FY20; and vi) we omit Terminal Amanjaya Phase 2, Terminal Bidor and Terminal Tronoh developments during the forecast period. — TA Securities, Oct 12