PBA has just announced its results for QE31/3/2011. Its net profit dropped by 12.3% q-o-q to RM11.0 million while turnover increased by 11.8% to RM56 million. The drop in net profit was due to higher tax provision. A better indication of PBA's improved bottom-line is the pre-tax profit which increased by 2.5% q-o-q to RM13.2 million. The improvement in the pre-tax profit is better than 2.5% q-o-q as the figure for QE31/12/2010 include a gain from a disposal of profit of RM3.8 million. If this item is excluded, PBA's pre-tax profit increased by 45% q-o-q.
When compared to the same quarter last year, PBA's net profit increased by 105% while turnover was up 15%. The substantial improvement in net profit y-o-y is attributable to higher water tariff rates which took effect in November 2010.
Table: PBA's last 8 quarterly results
Chart 1: PBA's past 24 quarterly results
Valuation
PBA (closed at RM1.00 yesterday) is now trading at a PE of 7.5 times (based on annualized EPS of 13.3 sen). This PE multiple is very low for a utility company. I believe PBA can command a PE multiple of 12 times, at least.
Technical Outlook
PBA is still in a downtrend line, with resistance at RM1.05. An upside breakout above the downtrend line would signal the start of upleg for PBA.
Chart 2: PBA's weekly chart as at May 23, 2011_plotted on log scale (Source: Tradesignum)
Conclusion
Based on attractive valuation, I believe PBA would be a stock for long-term investment. If PBA can break above the downtrend line at RM1.05, it can even be a good trading BUY.
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