Saturday, 12 December 2015

PBA (1) - Water Tariff Hike Resulted in 136% Earnings Growth

Author: Icon8888   |   Publish date: Thu, 17 Sep 2015, 07:06 PM 







1. Introduction

PBA is licensed by the government to supply water to Penang.

On 19 March 2015, PBA announced that Penang will implement water tariff hike effective 1 April 2015. The announcement caused share price to spike to a height of RM1.47.

However, over the subequent few months, this piece of news was forgotten and share price gradually retraced to around RM1.00.

On 28 August 2015, PBA announced its financial result for the quarter ended 30 June 2015. Net profit increased by a whopping 136% to RM14.8 mil per quarter (compared to average net profit per quarter of RM6.4 mil in FYE 31 December 2014).

In normal time, this piece of information would have triggered a feeding frenzy. However, in the past few weeks, most investors were busy fending off the bear. As a result, nobody really pay attention to this company.




2. Basic Financial Information

The Company has 331 mil shares outstanding. Based on market price of RM1.02, market cap is RM338 mil.

The group is in net cash position. It has loans of RM18.4m, cash of RM35.8 mil and net assets of RM744 mil. Net asset per share is RM2.25.

The group reported net profit of RM24.8 mil in FY2014. Based on market cap of RM338 mil, historical PER is 13.6 times.

Annual Result:
F.Y.Revenue ('000)Profit Attb. to SH ('000)EPS (Cent)PEDPS (Cent)DYNAPS
TTM268,00924,5487.4113.773.753.682.2500
2014-12-31261,01724,7597.4817.253.752.912.2000
2013-12-31251,73127,9308.4411.733.753.792.1600
2012-12-31244,56029,0358.7610.393.754.122.1100

However, based on annualised net profit of RM59.2 mil (being RM14.8 mil x 4), prospective PER will be 5.7 times. 




3. Dividend

Over the past three years, PBA paid out DPS of 3.75 sen. Based on average EPS of 8.2 sen, payout ratio is 45%.

Based on same payout ratio and prospective EPS of 17.9 sen (being RM14.8 mil x 4 / 331 mil shares), will the company declare DPS as high as 8 sen, translating into dividend yield of closed to 8% ?

Only time can tell.

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