The launch of new routes reinforces the attractiveness of land transport across all corners of the country.
PETALING JAYA: Perak Transit Bhd
’s 10-year compounded annual growth rate for earnings is anticipated to be around 4%, anchored by stable recurring income streams, robust 40% net margins and consistently positive free cash flow, analysts say.
That should allow the group to pay steady dividends and pare down debt, said BIMB Research.
The research house said it believes land-based transportation is a fundamental growth narrative for Malaysia.
This is driven by economic growth, increasing urbanisation from rural to urban areas, rapid development of satellite cities, and improvements in the quality of bus and coach services, enhancing their appeal.
Additionally, the launch of new routes reinforces the attractiveness of land transport across all corners of the country.
Perak Transit sits at the forefront of this growth story, research house said.
However, it adjusted Perak Transit’s discounted cash flow-based valuation, raising weighted average cost of capital to 9.6% from 8.8% due to a 20 basis point hike in debt cost and higher beta of one-time (from 0.9 times) as the share price has been exceptionally volatile in the past two months.
The research house revised its target price for the company to 68 sen from RM1 a share, implying a price-to-earnings multiple of only 4.4 times for next year.
It retained its “buy” call on the stock.
Perak Transit announced yesterday that it had received approval from the Tanjong Malim District Council to manage the town’s bus terminal under a 30-year concession.
“This is a testament to Perak Transit’s ability to secure long-term opportunities under an asset light model. This yet another testament that business is chugging along just fine,” the company said.
For the third quarter of this year, Perak Transit’s net profit rose to RM19.86mil from RM17.71mil in the previous corresponding period, while revenue dropped to RM49.09mil from RM52.08mil previously.
In a filing on its financial performance last month, Perak Transit said it had entered into a deal with subsidiaries of Edotco Malaysia Sdn Bhd to provide construction and engineering services for the building of telecommunication towers.
“As of today, the group has completed all 11 telecommunication towers. The group is actively seeking additional telecommunication tower construction projects to further contribute to the segment’s revenue.
“This new business segment aligns with the group’s strategy to pursue new opportunities and diversify its earnings base.”
Perak Transit also said it had received the Green Project Certificate under the Green Technology Financing Scheme for its RM17.1mil project involving the procurement of 30 new buses that meet the eligibility criteria for energy-efficient vehicles.
