Perak Transit (0186.KL) — From Public Bus Operation to Integrated Public Transportation Terminal

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Terminal AmanJaya can accommodate 8000-10000 passengers and it is a 3-storey building including basement car park. Terminal AmanJaya which is strategically located in Bandar Meru Raya, Ipoh and the surrounding commercial development in Bandar Meru Raya has the potential to attract visitors and passengers to Terminal AmanJaya.


Fundamental Datasheet:

1. P/E: 13.79
2. ROE: 13.50%
3. Revenue (TTM): 107 Million
4. EPS: 2.25
5. Dividend yield: 1.68%
6. Dividend Payout Rate: 22.96%
7. Net Profit Margin: 26.53%
8. Current Ratio: Current Total Assets/ Current Total Liabilities = 98,168/52,034 > 0 (pass)
9. Quick Ratio: (Cash + Marketable Securities + Accounts Receivable) / Current Liabilities = (38,185+21,197)/52,034 > 0 (Pass)


Business Segments:

1. Major contributors to Group’s revenue: Operations of Terminal AmanJaya integrated public transportation terminal
a) Rental of advertising and promotional (“A&P”) spaces
b) Rental of shops and kiosks
c) Project facilitation fee
d) Bus and taxi entrance fee and fee imposed for the usage of the basement car park and lavatory

2. Modern fleet and biggest stage bus operator in Ipoh, perak. Providing public stage bus and express bus services and bus charter services

3. Fuel business with the operations of several petrol stations in Ipoh, Lahat and Kuala Kangsar, Perak. Management of ADO incentive programmes


Perak Transit’s Brief History:

2006– Incorporation of The Combined Bus Services Sdn Bhd (TCBS), now a 99.89% subsidiary of PKTB
2008– Incorporation of Perak Transit Berhad (PKTB)
2009– Merged the bus services operations of GOC, IOC and KOC
2010– Received approval for the application and commenced construction of Terminal AmanJaya
2011– Received bus consortium status which consists of GOC, KOC and IOC by SPAD
2012– Completed and commenced operations of Terminal AmanJaya and BHP petrol station
2014– Terminal AmanJaya was identified as the only gazetted express bus terminal in Ipoh, Perak
2015– Commenced operations of Petron petrol station; Received Letter of Intent from SPAD on the appointment of TCBS as network operator for Ipoh under the Stage Bus Services Transformation Program for a period of 8 years
2016– IPO in KLSE Ace Market in early October


Ongoing Construction

– New integrated public transportation terminals in Kampar, Perak. It is expected to be completed by fourth quarter of 2018.


Future Construction

TCBS currently is one of PKTB’s subsidiary. TCBS inked a sale and purchase agreement (SPA) in March 2017 with property developer Pasti Kenari Sdn Bhd to buy two parcels of land measuring 34,571 sq m and 32,756 sq m. PTrans said the land, which is currently free from all encumbrances, will be used to build an integrated bus terminal complex, including a petrol station. This was subject to the authorities’ approval.
– The land was strategically located in Tronoh along the Ipoh-Lumut highway
– Will not have any effect on company’s gearing (satisfied entirely in cash)
– Expected to complete the land acquisition in March 2018


Prospects

1. Intend to develop integrated public transportation terminal in other parts of Perak and other regions in Malaysia, tentatively in Bidor and Tronoh.
2. Plan to develop Terminal AmanJaya into a commercial and lifestyle hub; and
3. Intend to increase revenue from the rental of A&P space by adopting new A&P platforms and by increasing A&P space at Terminal AmanJaya.


Risk:

1. Construction of an integrated bus terminal complex and petrol stations at the two new parcels of land is still waiting for the approval of regulatory authorities.
2. Since 2012, Terminal AmanJaya and BHP petrol station has been operated for nearly 7 years till today.


From the table above, if we do not take into consideration of the seasonal factors, particularly the average passenger movement for its public bus services and Terminal AmanJaya during long weekends, public holidays and school holidays, the growth of revenue generated from Terminal AmanJaya has actually been slowing down. We will expect the utilization of the integrated terminal to be fully attained as seen from the growth of revenue. The company will need new catalyst which will be the expansion of current space in Terminal AmanJaya, conversion of AmanJaya into a commercial and lifestyle hub, new A&P platform in AmanJaya, and new integrated terminal. New terminal in Kampar will only be operated in fourth quarter of 2018 as planned. Other terminals in Tonoh and other locations are still pending to get approval from regulatory authorities.

Hence, we will opine that the future growth of revenue generated from this segment will be narrow, given the new terminal in Kampar will only start its operation tentatively in end of 2018.

3. Other two business segments, which are bus operation and running of petrol stations see little growth. No new catalyst comes into the business. Stage Bus Service Transformation programme might help the bus operation to sustain in long term.


Revenue’s Catalyst:

1. The Group’s bus operations segments outlook is also positive, driven by Stage Bus Service Transformation programme as the operation runs all the 19 approved routes since September 2016 with 45 express buses fully delivered in March 2017.
2. IPO proceeds: There is still cash for business expansion (RM 1.465 million) and working capital (RM 8.33 million) which are intended to be utilised within 24 months from listing date. This implies that the cash from IPO will be fully utlized by October 2017.


Recent Bonus Issue and Free Warrants:

(i) Bonus issue of up to 114,294,800 new ordinary shares in the Company (“Perak Transit Share(s)”) (“Bonus Share(s)”) to be credited as fully paid-up on the basis of 1 Bonus Share for every 10 existing Perak Transit Shares
(ii) Issuance of up to 571,474,000 free warrants (“Warrant(s)”) on the basis of 1 Warrant for every 2 Perak Transit Shares


Dividend:

1. Company has been more generous in paying dividends for shareholders.

A first interim single tier dividend in respect of FYE 31 December 2017 of RM0.002 per share,
amounted to RM2,285,896 in respect of ordinary shares for the current financial period was declared by the Company on 9 March 2017, entitled on 28 April 2017 and was paid on 19 May 2017. (EPS=0.68; DPS=0.25; Divident Payout %= 36.8%)

A second interim single tier dividend in respect of FYE 31 December 2017 of RM0.0025 per share, amounted to RM2,857,370 in respect of ordinary shares for the current financial period was declared by the Company on 16 June 2017, entitled on 28 August 2017 and to be paid on 15 September 2017. (EPS=0.54; DPS=0.2; Dividend Payout %= 37%)


Conclusion

Started off as a bus operator, Perak Transit Berhad has evolved to a company that not solely relies on its bus operation but also its first integrated terminal in Perak. Moving on, the company also started to operate petrol station, commercialize its terminal and maintained good relationship with government which helped them to obtain the Stage Bus Service Transformation programme and Automotive Diesel Oil (“ADO”) incentive programme.

Over the time, Integrated public transportation terminal operations has become the major source of revenue and Perak Transit Berhad would like to replicate its success by purchasing two more parcels of land for construction of new terminal and petrol stations. The new terminal in Kampar which is an ongoing construction is slated to operate in fourth quarter of 2018. However, as what the risks that are mentioned, we would recommend investors to start accumulating its shares provided Perak Transit Berhad maintains its good financial position and completes the new terminal in Kampar as scheduled and at manageable cost.

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