PBA abound for further upside after 6-fold jump in profit

PBA Holdings Bhd share price looks like heading for a positive rebound after recent pullback. The counter touched a high of RM2.88 on 3 Sep 2024 before retracing to a low of RM2.33 on 30 Sep 2024. Over a year period, the counter had surged over 200% having touched a low of 78 sen in November last November. Immediate resistance level is pegged at RM2.74 and RM2.98 next with a stop loss price is set at RM2.22.

Fundamentally, the Penang licensed water supply operator, has recorded fantastic results. PBA reported net profit of RM55.2 million in 2QFY24, a turnaround from a net loss of RM3.3 million. This lifted its 1HFY24 net profit to RM69.6 million, representing an increase of 6-fold year-on-year.

The company had been consistently profitable in the past 5 financial years. Net profit fluctuated between RM24.8 million and RM77.1 million, with the net profit in the latest financial year being RM34.3 million. The company’s balance sheet is healthy with a net cash position.

Current ratio of 1.5x indicates that it has just enough liquid assets to cover short-term liabilities. In terms of Price/Book, PBA shares are presently trading at 0.81x based on its book value per share of RM3.04 as of end-June 2024.

The group is undertaking three major pipeline projects in Penang which will help to improve water supply services for 67.4% of Penang’s 689,786 registered water consumers. These projects are scheduled for completion latest in 2026 at a total cost of RM189 million. These pipelines will allow the group's subsidiary and Penang's water supply operator, Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP), to pump more water at higher pressures from the Sungai Dua water treatment plant.

In 2025, PBAPP will undertake the development of a new 114 MLD water treatment plant on the premise of the expanded Mengkuang Dam in Seberang Perai Tengah district. The RM120 million plant will also allow the company to pump less water from the Sungai Dua plant into Seberang Perai Tengah and more water to other areas in Seberang Perai. Under a Sungai Perak water scheme signed this year, Perak will be supplying Penang with treated water of 700 million litres of water per day.

The scheme is part of the Penang Water Contingency Plan 2030, where PBAPP will be spending RM1.18 billion over the next few years to increase the state's water supply to 602 million litres per day. The outlook looks rosy for the state water supply operator and investors should capitalise on its potential upside.