This article first appeared in The Edge Malaysia Weekly on September 18, 2023 - September 24, 2023

PBA Holdings Bhd won its first award — Highest Returns to Shareholders over Three Years — at the inaugural The Edge Malaysia Centurion Club Corporate Awards in 2019, when its share price gains over a three-year period beat those of its peers in the utilities, telecommunication and media sector. This year, it won the Highest PAT Growth Over Three Years award.

The water service provider for Penang made a net profit of RM77.1 million in its financial year ended Dec 31, 2022 (FY2022), up 75.2% year on year from RM44 million, after its earnings climbed 28.7% from RM34.2 million in FY2020, following a 19.1% drop from RM42.3 million in FY2019. These translated into an adjusted three-year compound annual growth rate of 22.2%.

The significant year-on-year increases in PAT in FY2022 and FY2021 stemmed primarily from the recognition of deferred tax assets — amounting to RM49 million in FY2022 and RM9 million in FY2021 — that were attributable to the utilisation of unabsorbed reinvestment allowances. 

In tandem with the PAT growth, the company’s earnings per share rose to 23.3 sen in FY2022, from 13.3 sen in FY2021, and 10.33 sen in FY2020. The group, which has been paying dividends annually since its debut on the Main Board of the Kuala Lumpur Stock Exchange — now the Main Market of Bursa Malaysia — in 2002, paid an annual dividend of three sen per share for FY2022, up from 2.25 sen for FY2021 and FY2020.

For its first quarter ended March 31, 2023 (1QFY2023), its net profit (unaudited) dropped 12.7% y-o-y to RM12.97 million, from RM14.86 million previously, owing to an increase in energy expenses. This is despite revenue rising 22.64% to RM97.39 million from RM79.42 million previously.

Looking ahead, PBA Holdings expects revenue from the sale of water to grow further, in line with the new tariff implementation on Jan 1, 2023. It is the holding company of Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP), which operates as the licensed water supply operator in Penang.

The Penang government is the group’s largest shareholder, with a 55% stake, followed by Penang Development Corp, which holds 10%. In its 2022 annual report, PBA Holdings chairman Chow Kon Yeow, who is Penang’s chief minister, stressed that the state urgently needed to tap a second major raw water resource in a bid to meet the state’s increasing water demand.

The move is also to address Penang’s raw water risks due to its overdependence on Sungai Muda in Kedah, and to allow the state to effectively conceptualise and implement a sound contingency plan that will be implemented whenever there is a mishap at the river.

Since 2011, the Penang government and PBAPP have been asking the federal government to implement the Sungai Perak Raw Water Transfer Scheme (SPRWTS), which it deems the most cost-effective solution to address the state’s raw water needs over the long term.

To “buy time” for Penang until the SPRWTS is realised, as well as to prepare to meet even higher water demand in the future, PBAPP will implement five water supply engineering projects under its Raw Water Contingency Plan 2030 (RWCP 2030) between 2023 and 2028.

Under the RWCP 2030, PBAPP plans to invest a total of RM842 million to boost its treated water production capacity by 30.5%, or 488 million litres per day (MLD), to ensure water supply sustainability in Penang until 2030.

As at the March 31 cut-off date for The Edge Malaysia Centurion Club Corporate Awards 2023, PBA Holdings’ shares were trading at 77 sen (adjusted) apiece, giving the company a market capitalisation of RM254.9 million. The stock closed at 81 sen on Sept 5, raising the market cap to RM268.3 million.

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