Ptrans Q2 2019

1. Gross profit improved to 42.48% cumulative quarters in 2019 VS 39.85% in 2018 (well done to the team for controlling the COGS effectively).
2. Revenue increased by 3% however its general and administrative expenses dropped by 0.3% (another thumbs up to the management team for controlling the admin expenses so well).
3. Other operating income was higher by 138% or RM 2.2 million due to higher rental income from rental of construction equipment. 
4. Finance cost is higher this quarter and accounts for 20% of profit before tax as their bank borrowings was higher. Although the company's bank borrowing was higher, however the gearing ratio actually dropped from 64% to 62% which is good. 
5. Profit before tax improved by 23% however profit after tax only improved by 1.8% due as cumulative quarters for 2018, there is a tax income of RM 2.7 million. Nevertheless, the tax rate for the current quarter is only 3.3%.
6. Although the company has higher net profit, but its EPS dropped by 9.7%. This is due to increase in number of shares result from warrant conversion. Number of shares increased by 6.2%.

1. Cash flow from operating is higher at RM 17 million compare to RM 13 million previously. 
2. Cash from used in investing is lower at RM 15 million compare to RM 38 million previously. 
3. From the above calculation, we can conclude that with higher operating cash flow and lower investing activities, PTRANS is able to generate more free cash flow moving forward to pair down its debts as well as used for dividend payout. 

1. Revenue was higher by RM 4 million for its terminal operations however operations from petrol station and buses are slightly lower by 10% and 0.9% respectively. 

1. Q2 usually serves as the strongest quarter for PTRANS as there are more long weekends, public holidays and school holidays. 

1. Terminal Kampar has commenced its terminal operation at the end of 2nd quarter. Meaning we could see its contribution at the end of second quarter of 2019. 

Comments

1. Better efficiency is seen from the company profit and loss account for the cumulative quarters in 2019.
2. Balance sheet becomes stronger as PTRANS has a free cash flow of RM4.6 million for cumulative quarters in 2019. As long as if the company do not immediately start its 3rd terminal project, i believe PTRANS could pair down its debts and further strengthen its balance sheet in a short period. 
3. The only uncertainty now is when the revenue and expenses from terminal kampar kicks in next quarter, will the overall company earnings being lifted or dragged lower? 
4. However according to Affin Hwang report: Terminal Kampar’s ground floor operations — comprising bus services, advertising and promotion as well as rental of four shoplots and eight kiosks — have kicked off with a 90% occupancy rate, while the overall expected take-up rate from prospective tenants for the entire mall stands at 70%.Furthermore, most of the anchor tenants — cineplex, gym, bowling alley and supermarket — have been secured.
5. If Terminal Kampar will generate some good cash flow, then the additional shares from warrant conversion and high gearing ratio would not be an issue. 
6. Assuming if PTRANS have an full year EPS of 2.52 sen, a 35% dividend payout will be 0.89 sen. PTRANS has paid out 0.25 sen in Q1, therefore expecting another 0.64 sen to be paid out in Q3. At current price of RM 0.195, DY is set to be 4.5%
7. Valuation wise, for 2.52 sen of EPS a year, its PE at RM 0.195 is 7.7 which is deemed to be undervalue if Terminal Kampar is lifting its earning.