It seems many once again misinterpreted PBA’s deferred tax expense/liability.

To provide context, in 2018, PBA reported a loss after tax due to a significant RM137.60 million deferred tax liability. However, this was a non-cash flow item, as clarified in PBA’s 2018 Annual Report (page 13):

"Please note that the recognition of the deferred tax liability is a NON-CASH FLOW item. The ACTUAL tax that is payable by PBAHB to the IRB for FY2018 is only RM1.55 million, based on a PBT of RM36.14 million offset against other tax incentives."

The relationship between unabsorbed reinvestment allowance (RA) and deferred tax liability is further detailed on page 14 of AR2018.

This pattern is consistent. In FY2023, PBA reported a deferred tax expense of RM29.7 million, but its cash flow statement showed tax paid of only RM4.726 million.

Similarly, in 3QFY2024, PBA reported a deferred tax expense of RM18.3 million, with a cumulative total of RM17.0 million for 9MFY24.

Yet, the 9M24 cash flow statement indicates income tax paid of just RM5.581 million.

Focus should be on the actual income tax payable, as deferred tax expenses are non-cash accounting entries that do not affect the company’s operational cash flow. Misinterpreting these figures risks undervaluing PBA’s true financial performance.

#Penang2030

3Q24 PBT RM42.2m +45% yoy, revenue RM139.9m +22% yoy.

Deferred tax expense is a non-cash item.

9M24 Cash flow from operations before working capital changes RM159.4m +58% yoy

Overall performance is ok.

Budget announced next year 2% dividend tax. Pay much higher dividend upfront now will be good for everyone.

Next month is already December. Savvy long-term investors focus on future annual earnings, 2025 and beyond.

@hng33 because board deliberating special dividend??

Icon8888 is back!

Thanks mizie for the data, hope the profits you make from PBA will cover all of your future water bills

Instead of feeling jealous of Penang (The Silicon Valley of the East), Kedah should be buying up PBA shares to ride the growth wave together... hahaha

NO BASIS FOR KEDAH TO CLAIM RAW WATER CHARGES FROM PENANG.

https://pba.com.my/pdf/news/2017/12082017_PBAPP_PR_Penang_Does_Not_Owe_Kedah_for_Raw_Water_SungaiMuda_2.pdf

https://www.pressreader.com/malaysia/the-star-malaysia-starbiz/20240831/page/10/textview

Good sharing. Thanks
https://youtu.be/5hJjXgN6JOk?si=-YoCXY6T2wjT266M
James Ng

[转贴] [Video:浅谈PBA HOLDINGS BERHAD, PBA, 5041] - James的股票投资James Share Investing
https://klse.i3investor.com/web/blog/detail/general/2024-08-28-story-h-153207888

1 day ago

Yes, true. Just compare their market cap vs net profits. It is so clear

Bursa has been attracting foreign fund flow recently. I hope some of the foreign water funds start buying PBA.

Fidelity Water Sustainability Fund
Invesco S&P Global Water ETF
iShares Global Water ETF
Invesco Water Resources ETF
First Trust Water ETF
Invesco Global Water ETF
Lyxor MSCI Water ESG Filtered UCITS ETF
L&G Clean Water UCITS ETF
Global X Clean Water UCITS ETF
Allianz Global Water
Calvert Global Water Fund
DWS Global Water
Ecofin Global Water ETF
KBI Global Investors Water Fund
KBI Global Investors Aquarius Fund

"Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble." - Warren Buffett

haha

UnicornP

Warren Buffett - "Be fearful when others greedy" can be applied now or not?

5 minutes ago

Warren Buffett and Charlie Munger have always sought to invest in companies with monopoly-like status.

PBA's long-standing issue of low water tariffs has now been resolved, allowing for potential tariff increases every 3 years.

30 years of pent-up earnings are now being unleashed, paving the way for superior earnings growth going forward.

Might have also caught the attention of new local/foreign institutional investors. Many were previously unaware of PBA, which is the only Pure Play water utilities stock listed on Bursa Malaysia.

hng33

Among top 30 largest shareholder, many are from unit trust fund/investment bank, insurance, Singapore fund etc. Therefore, if any of these funds increase their shareholding, PBA share can snap up very quickly

2 minutes ago

Those who love PBBANK (1295) should love PBA (5041) too haha

Many companies/stocks with lousy earnings (some even losses) and lousy growth prospects are trading at expensive valuation and higher market cap than PBA.

Whereas PBA still so UNDERVALUED. It is a monopoly business (no competitors) that Warren Buffett and Charlie Munger loves to own, recurring earnings, recession proof, etc. So much more upside, in my view

#PBA

PENANG: THE SILICON VALLEY OF THE EAST
https://www.semi.org/en/sea-newsletter-penang-the-silicon-valley-of-the-east

When taking a shower today, don't forget that...

Water may be a commodity that you don't think about when it comes out of the tap, but water is essential to life.

Water is a key input in everything from food and beverages to the cleaning of semiconductor wafers and hydraulic fracturing (fracking). The sourcing, purification, and distribution of water is big business around the world, and the threat of climate change makes that more true now than ever.

Hi Erudite, could you kindly share what your water bill was like from Jan-Apr so we can better understand the impact? Thanks.

Posted by Erudite > 1 day ago | Report Abuse

Hng33 is not wrong. His assumption reasonable. Only thing disruption + tariff hike only effective in March (Jan, Feb still old rate) as PBA practice bimonthly billing. U can check ur bill… I m penangite so I know. Next Q will be bombastic

1Q24 Note 15:
15. Current year prospects
Revenue from sales of water is expected to further increase in line with the new water tariff implementation with effect from 1 February 2024 for domestic consumers.

Water may be a commodity that you don't think about when it comes out of the tap, but water is essential to life.

Water is a key input in everything from food and beverages to the cleaning of semiconductor wafers and hydraulic fracturing (fracking). The sourcing, purification, and distribution of water is big business around the world, and the threat of climate change makes that more true now than ever.

Penang Development Corp to set aside RM5 bil for 15 high-impact projects
https://theedgemalaysia.com/node/705866

PENANG: THE SILICON VALLEY OF THE EAST

The state of Penang, nestled along the northwest coast of Peninsular Malaysia, needs no introduction in the global electronics manufacturing sector. Despite its diminutive stature with just over 1,000 square kilometers of land area and a 1.8 million-strong population, Penang commanded an estimated 5% of global semiconductor exports in 2019, according to data compiled from the Department of Statistics Malaysia (DOSM) and UN Comtrade.

Today, Penang houses more than 350 MNCs that are supported by over 3,000 manufacturing-related SMEs. As Penang flourished as a vibrant, regional E&E manufacturing hub, the local talent pool steadily accumulated a wealth of business intelligence and technical experience, enabling the robust supply chain to evolve in tandem with technology megatrends. This, in turn, enabled the State to focus on pursuing investments that have propelled the industry up the value chain, away from its beginnings as a low-cost manufacturing hub. Consequently, Penang has seen a proliferation of upstream technology-related investments in high value-added functions in recent years, ranging from research and development (R&D), design and knowledge-based solutions, and downstream advanced manufacturing and testing to global business service (GBS) and Centre of Excellence (CoE) activities.

Penang’s growing significance in the global E&E value chain is demonstrated by its steady and resilient export performance in recent years. From 2014 to 2019, the State’s E&E exports grew at a compounded annual rate (CAGR) of 12% to reach RM210 billion (US$51 billion). It has emerged as a hub for professional, scientific and controlling instruments (including medical technology), with exports of these products growing at a 5-year CAGR of 15% to reach RM23 billion (US$6 billion) in 2019.

E&E products, alongside professional, scientific and controlling instruments, collectively contributed between 77% and 82% of Penang’s total annual exports since 2014, and accounted for 50% of Malaysia’s exports in these two segments during the period.

More impressively, despite the disruptions from the COVID-19 pandemic, Penang’s total exports continued to rise in 2020, growing 7% year-on-year to RM310 billion (US$75 billion), and a further 14% year-on-year in January and February 2021, driven by strong global demand for semiconductors.

https://www.semi.org/en/sea-newsletter-penang-the-silicon-valley-of-the-east

927 MLD water consumption

On Sunday (17.3.2024), water consumption in Penang was estimated to have reached a high of 927 million litres per day (MLD) as compared to the daily average of 877 MLD recorded in 2023.

This represents a sudden 50 MLD surge in water consumption year-on-year.

Glad to learn that Voyager Assets Limited is one of PBA's top shareholders.

Voyager Assets Ltd is an investment vehicle of savvy value investor Mark Chang, the founder of JobStreet.

Based on PBA's latest annual reports, Voyager Assets have been increasing its stake in PBA year by year.

AR 2020: 1,359,100
AR 2021: 2,099,100
AR 2022: 3,219,600

Voyager Assets is also a top 10 shareholder of VITROX with 10.16 mil shares.

Mark Chang is one of the most iconic entrepreneurs in Asia. He is the founder of JobStreet.com, which he led to become the largest online employment firm in Southeast Asia, and which was eventually acquired by SEEK in 2014 for US$582 million.

With your FY2024F PBT 146.02, net profit should be way higher

@dragon328
For non-domestic sector, there will be another round of tariff hike in 2026.

This seems new, additional income of RM10m a year
4Q23 Note 6:
"The amount due from the State Government of RM88.76 million is receivable by eight equal instalments of RM10 million per year, followed by one final instalment of RM8.76 million, commencing from 2025."

Looks like PBA is getting ready to further grow its renewable energy (solar and hydro) business.

4Q23
Note 10:

"On 5 January 2024, the Company increased its investment in its wholly-owned subsidiary, PBA Green Technology Sdn. Bhd. by RM1 million through the subscription of 1 million new shares at an issue price of RM1 each settled by way of cash."


PBA GREEN TECHNOLOGY

PBAHB incorporated a new 100% owned subsidiary called “PBA Green Technology Sdn Bhd” (PBAGT) on 12.12.2018. PBAGT was set up to take on projects in the fields of hydro and solar power. The idea is to generate electricity that may be used to offset or reduce the energy costs of PBAPP.

For the PBA Group, the main objectives for the renewable energy initiatives are to:

Explore renewable technology projects at PBAPP’s water supply installations, in support of the Vision 2030 aspiration of making Penang a “family-focused smart and green state that inspires the nation.”
Offset or reduce PBAPP’s energy costs by generating “green energy” that may be exported into the national grid.

Unlock the energy generation potential of Penang’s water supply installations, without compromising core water supply operations, safety and the environment.

https://pba.com.my/pba-group-of-companies/

@benghooi
Thanks for pointing out.
In other words, PBT would be even higher if the lower ICPT surcharge was for the whole 12 months of 2023, instead of 6 months (1 July - 31 Dec 2023)

@Bullstocks888

The income statement can mask/hide the real earnings of PBA, but not in the Cash Flow statement. Operating cash flow before working capital changes is RM128.5m in 2023 vs. RM87.4m in 2022. Net OCF RM179m in 2023 vs. RM103m in 2022.

The deferred tax expense of RM25.7m is a non-cash item and might potentially be reversed in the upcoming quarters.

The tariff hike for domestic users (and other categories) was just implemented on 1 Feb 2024, not in 4Q23. So, the RM86m increase in revenue that PBA mentioned will only be reflected from 1Q24 onwards.

While costs may have increased a bit in 4Q, these cost increases can be passed on in the next tariff adjustments in 2026 and 2027 for non-domestic and domestic users. Consequently, earnings are expected to continue rising after the adjustments.

I will continue to hold PBA as I believe in my long-term thesis, rather than focusing on the next quarter or two. In investing, one shouldn't feel pressured to chase returns for the next few months. Taking the longer-term view and focusing on the bigger picture is how great returns are generated.

If the market values PBA at a reasonable 10x PE on RM150 million earnings, we're looking at a share price of RM4.50.

Warren Buffett and Charlie Munger have always sought to invest in companies with monopoly-like status, ideally akin to an unregulated toll bridge.

PBA's long-standing issue of low water tariffs has now been resolved, allowing for potential tariff increases every three years.

Three decades of pent-up earnings are now being unleashed, paving the way for superior earnings growth going forward.

Indeed @dragon328, with Penang having the second lowest domestic tariff, it paves way for another round of decent tariff hikes in 3yrs time.

There will also be another earnings boost coming sooner in Jan 2026 from non-domestic tariff hikes (last adjustment on 1 Jan 2023).

Although PBA expects RM86m in additional income for 2024, my estimates indicate it's closer to RM100m. PBA is probably being conservative in their estimation.

Bulk domestic water tariff is also now at a flat rate RM1.73 per cubic metre vs. 35sen for >90 cu m usage previously. And there's the additional 7sen per cubic m for non-domestics with the ICPT.

The stock may have jumped but it hasn't priced in many positive factors yet. I still see strong upside.

https://pba.com.my/pdf/news/2024/07022024_PBAPP_DOM-Tariffs-2024_Apendix.pdf

"The PBA Group of Companies projects to generate an additional RM86 million in
revenue in 2024 from the implementation of the new rates."

@Bullstocks888

Exactly. Not to forget that PBA is also in a strong net cash position of RM193m as of 30 Sep 2023 (cash of RM213m vs. total borrowings of RM20m).

On the other hand, Ranhill is in net Debt position (RM1.04 Billion total borrowings vs. cash RM264m)

So PBA is very attractive from an Enterprise Value standpoint too.

@Bullstocks888
For context:
PBA Holdings Bhd: (P)rofits to (B)ecome (A)bundant?
https://klse.i3investor.com/web/blog/detail/dollardollarbill/2023-12-28-story-h-211507880-PBA_Holdings_Bhd_P_rofits_to_B_ecome_A_bundant_dollardollarbill

With 15% ROE moving forward...

Historical high P/B was abt 1.1x in 2004 when ROE was abt 9%

Congrats everyone!

PBA next to follow suit!

It's the Year of the Dragon328
YTLPOWR + PBA
Multibagger stocks

If the market values PBA at a reasonable 10x PE on RM150m earnings, we're looking at RM4.50.

Warren Buffett and Charlie Munger always tried to buy companies that have monopoly-like status. Ideally an unregulated toll bridge.

PBA's issue of low water tariffs has now been resolved, and water tariffs can now be increased every 3 years. The new tariff rate adjustment also requires water consumers to pay the Imbalance Cost Pass-Through (ICPT) rates; for Penang it will be +7 sen for every cubic metre of water consumption for now. So the new effective 'water' tariff rates are actually higher.

@dragon328
Congrats on YTL/YTLPOWR and thanks for always sharing your valuable insights on those companies.

Posted by dragon328 > 6 hours ago | Report Abuse

many thanks for @Neoh Jia An, @dollardollarbill and KingKKK for the good articles and information on PBA

Ranhill secures three-year licence renewal from SPAN for water treatment in Johor
https://theedgemalaysia.com/node/697173

I like Ranhill, but I like PBA more :)

PBA Holdings Bhd: (P)rofits to (B)ecome (A)bundant?
https://klse.i3investor.com/blogs/dollardollarbill/2023-12-28-story-h-211507880-PBA_Holdings_Bhd_P_rofits_to_B_ecome_A_bundant_dollardollarbill.jsp

Tariff Setting Mechanism (TSM)

Songkran water festival

Posted by StartOfTheBull > 1 hour ago | Report Abuse

If water tariff is lower then more people can afford to use water running hose to wash car.

https://www.pressreader.com/malaysia/the-star-malaysia/20240109/282626037520953
"This means my recent average monthly water cost is really a very low RM3.74; even a cup of teh tarik and two pieces of roti canai cost more than that."

#PBA

@hng33

Agree with you that some might have misinterpreted the statement and taken profit.

The statement:
"the expected average increase imposed on consumers would only be an additional RM3 to the monthly bill"

The keyword is "average". Another keyword is "expected".

How is the average calculated? For which usage bracket? Referring to average user? First 35,000 litres per month? Referring to which states?

Many states are applying for tariff increase. Penang, Kedah, Perak, Melaka, Johor, Selangor, etc.

If we use Selangor as an example then it's easier to understand.

Selangor current tariff structure:

0-20 cubic metres = RM0.57
>20-35 cubic metres = RM1.03
>35 cubic metres = RM2.00

So, if a resident in Selangor uses 30 cubic metres (30,000 litres) per month, the current water bill is RM21.70.
Hypothetically, if tariffs increase by about 15%, new tariff will look like

0-20 cubic metres = RM0.66
>20-35 cubic metres = RM1.19

New monthly water bill is RM25.10, difference of RM3.40

Penang current tariff structure is very low. For the FIRST TWO usage brackets
0-20 cubic metres = RM0.22
>20-40 cubic metres = RM0.46

A resident in Penang is currently paying a ridiculous RM9 for 30 cubic metres of monthly water usage.

Previously Penang was seeking tariff review for:
0-20 cubic metres = RM0.55
>20-35 cubic metres = RM1.10
>35 cubic metres = RM2.00

Based on this, the monthly bill would be RM22, difference of RM13.

This was the previous suggested tariff back in 2021. It could be even higher in 2024.

Other states that have much higher tariff than Penang are also applying for a review, like Selangor for example.

So, Penang would obviously get a much higher tariff increase as it currently has the lowest domesitc tariff among all states in Malaysia.

Also take note of what SPAN said previously in its annual report 2021 page 48: Only Pahang, Perlis and Penang are allowed to increase tariff by more than 30% because of their existing low rates. Other states limited to 30%.

Just like MSM faces hurdles with sugar ceiling prices, PBA awaits potential water tariff hikes for increased profits. Two sides of the same coin in different sectors, but both operating in essential commodities - sugar and water.

PBA could be trading at 2-3x potential earnings...

PBA Holdings Bhd: (P)rofits to (B)ecome (A)bundant?
https://klse.i3investor.com/web/blog/detail/dollardollarbill/2023-12-28-story-h-211507880-PBA_Holdings_Bhd_P_rofits_to_B_ecome_A_bundant_dollardollarbill