PTRANS: Earnings Exceed Expectations Amidst Strategic Cost Management

A recent investment bank research report indicates robust financial performance for a prominent transport and property development company, with its third-quarter fiscal year 2023 (Q3FY23) net profit reaching RM9.9 million. This marks a significant 32.8% year-on-year (YoY) increase and a marginal 0.3% quarter-on-quarter (QoQ) improvement, comfortably surpassing both management’s and analysts’ full-year estimates, constituting 80% and 70% of their respective forecasts.

Performance Review

The strong performance was primarily attributed to the increased contribution from Terminal Bidor Sentral (TBS), which witnessed a steady rise in occupancy rates, reaching 80% during the quarter. Other key terminals, Terminal Meru Raya (TMR) and Terminal Kampar Putra (TKP), also maintained healthy occupancy rates of 83% and 75%, respectively. Management’s proactive cost efficiency measures were instrumental in maintaining pre-tax profit (PBT) despite softer utilization rates in certain segments, showcasing strong operational control and effectively mitigating potential default risks previously highlighted.

Operational Challenges and Future Outlook

While financial performance was strong, the company continues to navigate certain operational challenges. The order book for the Project Financing Fund (PFF) has been adjusted from RM1.7 billion to RM1.27 billion as of September 2023, largely due to 60% of receivables being moved to a 90-day credit term. Furthermore, the construction of Tronoh Sentral has experienced slight delays, reaching just over 40% completion due to logistics disruptions and raw material shortages. Completion is now anticipated in 2026, with operations expected to commence in 2027, a slight deferral from previous estimates.

Conversely, Seri Iskandar Sentral’s construction is progressing well, exceeding 20% completion and on track for full completion by March 2028, with full-year earnings contributions expected in FY29. The report also highlights that while a potential default risk exists for new developments like Terminal Tronoh Sentral and Terminal Seri Iskandar, funding has been secured. However, the loss of rental income could impact future earnings if new event operators are not onboarded promptly to fill the slack.

Despite these challenges, the company demonstrates strong financial health with RM261 million in cash, including RM230 million from Sukuk proceeds earmarked for project financing and RM30 million in free cash flow. The investment bank maintains its FY25 and FY27 earnings projections, reaffirming a positive long-term outlook.

Analyst View

TA Securities maintains a BUY recommendation on the stock, with a target price of RM0.25, representing a potential upside of 25.0% from its last traded price of RM0.20. The recommendation is supported by the company’s robust Q3 performance and strategic management of costs.