KUALA LUMPUR (Aug 17): AmBank Research is expecting Perak Transit Bhd to announce flattish results for the second quarter ended June 30, 2021 (2QFY21) on Thursday (Aug 19), but said this will still be commendable given the challenging operating conditions on the heels of the reintroduction of the Movement Control Order (MCO), both nationwide and in Perak, since May.

In 1QFY21, the public transport operator recorded a 55.6% year-on-year (y-o-y) increase in net profit to RM13.4 million.

Nevertheless, net profit for the cumulative six-month period (1HFY21) is expected to come in at between RM25 million and RM29 million, up 50% to 74% y-o-y, according to AmBank Research. This is based on expectations that the 1HFY21 net profit will account for 51% to 59% of the research firm's full-year forecast of RM49.3 million and 49% to 57% of the full-year consensus estimates of RM50.9 million for Perak Transit.

According to the research firm, this strong earnings growth will be underpinned by a higher contribution from the integrated public transport terminal operations, thanks to the new advertising income stream from Kampar Putra Terminal Sentral which opened last September.

"The locked-in incomes from advertising incomes and project facilitation fees (both combined typically contribute to more than 95% of revenue from the terminals) will continue to ensure the company’s resilient performances in spite of the MCO, as well as its costs containment efforts and lower finance cost.

"Meanwhile, we expect muted results from its petrol station and bus transportation operations amid the MCO. However, we are unperturbed as they are not Perak Transit’s key earnings contributors and growth drivers," it said in a report today.

AmBank Research is maintaining a "buy" call on Perak Transit's stock, but has lowered its fair value (FV) by 13% to RM1.05, from RM1.21 previously, to reflect the dilution from its recently completed issue of one-for-four free warrants.

"We continue to like Perak Transit for 1) its unique business model, that is, the operation of modern public transport terminals that emulate airports; 2) the proven commercial viability of this business model in its Terminal Meru Raya in Ipoh and the newly opened Kampar Putra Sentral; and 3) the vast opportunities to replicate this successful business model. "Already, it has at least three more projects in the pipeline, namely Bidor, Tronoh and Alor Setar."

"At 7 times to 8 times forward earnings, we believe Perak Transit offers investors a good opportunity to own a defensive public infrastructure business that is replicable for growth at bargain valuations," said AmBank Research.

At 9.08am, Perak Transit shares were up 1.5 sen or 2.63% at 58 sen, bringing a market capitalisation of RM380.71 million.