PTRANS: Strong Earnings Driven by Cost Control, Valuation Adjusted Amidst Market Activity
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company delivered a robust financial performance for the first nine months of fiscal year 2025 (9M25), with core profit reaching RM59.5 million. This performance was in line with market expectations, marking a significant 12.1% year-on-year growth despite only a marginal 1.8% increase in revenue. The strong showing was primarily attributed to effective cost management and a recovery in margins, largely due to the absence of costs associated with Sukuk issuance incurred in 9M24. The company also declared a fourth interim dividend of 0.25 sen per share, bringing the total FY25 dividend to 1.5 sen per share, representing a yield of 5.3%.
While the company’s net gearing improved slightly to 0.55x from 0.66x a year ago, and its quick asset ratio and interest coverage ratio remained healthy at 2.0x and 7.1x respectively, indicating low liquidity risk, the report highlighted certain operational challenges. Notably, a significant increase in debtor balances to RM66 million in 3Q25, a 75% quarter-on-quarter and 130% year-on-year rise, led to a sharp decline in operating cash flow. Management explained this was due to delayed payments from some tenants.
Market Dynamics and Valuation Review
The company’s shares recently experienced a heavy selloff, which management attributed to short-selling activities and subsequent margin calls on its founder, Dato’ Sri Cheong. This resulted in forced selling by stockbrokers, significantly reducing the founder’s stake from 30.0% to 9.0%. The report noted that margin call risk remains a concern given ongoing substantial margin trading activity in the shares.
In light of these market dynamics and to adopt a more cautious approach to valuation, the investment bank has revised its target price for the company. The new target price stands at RM0.46 per share, adjusted from the previous RM1.08, based on a stress-tested valuation utilizing FY26 adjusted net tangible asset with a 3% ESG discount. Despite the downward revision in the target price and recent market volatility, TA SECURITIES maintains its BUY recommendation, viewing the current situation as a “bottom fishing opportunity.” The bank expects the company’s underlying fundamentals to reassert themselves once the margin call risks abate. Earnings projections for FY25-27 remain unchanged.
