thoughts &



3 Critical Questions to Ask before Investing in Perak Transit Berhad

Perak Transit Berhad or PTrans (Bursa: 0186) was incorporated in Malaysia on 5th September 2008 as a private limited company and was listed on the Bursa Stock Exchange under ACE Market on 6th October 2016. Perak Transit was founded by its current Managing Director Dato’ Sri Cheong Kong Fitt who is very much involved in the company’s day-to-day operations as the business is able to benefit from his experience from managing bus terminal, petrol stations and bus operations.

1. How does Perak Transit Berhad Generates its Revenue and Profits?

Perak Transit is principally involved in the operations of Terminal Amanjaya integrated public transportation terminal (IPTT), provision of public bus services and petrol station operation. Perak Transit’s revenue streams and profit contributions are as stated:

a) Integrated Public Transportation Terminal Operations

· Rental of advertising and promotional (A&P) spaces

· Rental of shops and kiosks

· Bus and taxi entrance fees

· Project Facilitation Fee

· Car park fees

· Lavatory fees

Contributes 38% of Revenue and 83% of Gross Profit of FY17

b) Public Bus Services

· Provision of public stage bus and express bus services

· Government support fund for unprofitable routes to ensure continuity of bus services

· Rental of spaces on buses for advertisement

Contributes 28% of Revenue and 14% of Gross Profit of FY17

c) Petrol station operations

· Operates 4 petrol stations in Perak – Shell Lahat, Shell Tanjung Rambutan, BHP Terminal Amanjaya and Petron at Lubok Merbau, Kuala Kangsar

Contributes 34% of Revenue and 3% of Gross Profit of FY17

2. What are the Growth Prospects for Perak Transit Berhad?

The growth of Perak Transit is to develop integrated public transportation terminals in other parts of Perak and other regions in Malaysia. Approximately RM20 million of IPO proceeds to build Terminal Kampar will see its completion by end of 2018. The rationale for Terminal Kampar are growing population, increasing economic activities in and surrounding Kampar, existence of UTAR, KTAR and WIS, local development plans and proximity to North-South Expressway.

Terminal Tronoh which is currently under construction will benefit from the growth of Tronoh into an education town with the existence of two universities (Universiti Teknologi Petronas and Universiti Teknologi MARA) are in the vicinity. Terminal Tronoh is also strategically located in Tronoh along the Ipoh-Lumut highway. Perak Transit has recently acquired land in Bidor to build a new terminal as a replacement of the old terminal.

Another growth plan is to develop Terminal Amanjaya into a commercial and lifestyle hub with a focus on commercial and lifestyle-related businesses and activities. The management intend to expand Terminal Amanjaya existing gross building area by 166,443sqft and have a gross building area of 375,245sqft in total. This will enable additional income from increasing gross leasable area resulting in additional rental revenue from retail tenants and increase in available A&P spaces contributing to additional rental revenue from A&P spaces.

3. Does Perak Transit Berhad have any competitive advantages?

Perak Transit has a monopolistic position in an industry with barriers to entry which gives it is competitive edge over its competitors. Terminal Amanjaya is the only gazetted express bus terminal in Ipoh providing services and amenities to passengers and visitors.

Strategic location of its integrated public transportation terminal further enhances Perak Transit’s position. Terminal Amanjaya is located at the heart of Bandar Meru Raya, Ipoh which is the new administrative centre for the Perak state. Meru Raya is set to also house over 10 government buildings, including those for the Ministry of Home Affairs, Perak Foundation, Forestry Department, National Audit Department, Malaysia Anti-Corruption Agency, Ministry of Home Affairs and the National Archives of Malaysia.

In 2017, the bus operation segment of Perak Transit achieved 97.8% in market share of Ipoh stage bus ridership with a fleet of 171 buses and 979,650 ticket purchasing passengers.

Our Point of View

We reckon that Perak Transit is a business with stable recurring income with growth potential. It is in a prime position to offer services in terminal construction, management and operations of integrated public transportation terminal in other states as a next growth leap. Perak Transit rewards investors with a dividend pay-out policy of up to 25% of net profits attributable to shareholders. However, investors should take note that Perak Transit has limited financial track records as it has been listed for only two financial years. Debt level management of the company should be monitored as well despite mostly being used for business expansion. Many fund houses expressed interest to invest in the company but are unable to do so because Perak Transit is in the Ace Market. Its management has applied for Main Board listing and will get results around or after August 2018. We opined that the potential main board listing will bode well for Perak Transit and boost its expansion plans.

Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author involved in the writing of this message has no vested interest in the companies. Please consult a professional for expert financial or other assistance or legal advice