Perak Transit Bhd (KLSE: PTRANS) is principally involved in operations of integrated public transportation terminal and provision of public bus services. The Group is also involved in the petrol sales business with the operations of several petrol stations. In this article, we will take a closer look at the business, management and financial aspects of the Group, to see if it is worth an investment.
Perak Transit’s crown jewel is Terminal AmanJaya. It houses 17 express bus departure bays, 5 express bus arrival bays and 40 holding bays within a 3-storey building complex. Total building area is 208,802 sq. ft. of which 49,129 sq. ft. can be leased to potential tenants and the remaining area use as promotional space for rental income. There is also an undeveloped area at Terminal AmanJaya, measuring 135,721 sq. ft, for future expansion.
As far as revenue is concerned, Perak Transit has 3 major income sources, i.e.
public transportation terminal operations;
i) Rental of advertising and promotional (A&P) spaces;
ii) Rental of shops and kioks;
iii) Project facilitation fee; and
iv) Others such as bus and taxi entrance fee and fee imposed for usage of the basement car park
- Providing public stage bus and express bus services and bus charter services; and
- Petrol station operations in Ipoh, Lahat, Tanjung Rambutan and Kuala Kangsar, Perak.
In financial year (“FY”) 2018, each of the 3 divisions provide significant revenue to the Group. However, at the segment results level, the terminal operations provide the bulk of the segment earnings (92%) given the higher margin from rental and project facilitation fees versus bus services and petrol station operations.
Basically, you could see Perak Transit as a toll-gate business. A bus terminal is a strategic location where traffic is congregated. The traffic of people through the terminal is their “asset” so to speak.
As the only gazetted express bus terminal in Ipoh, Terminal AmanJaya is situated right beside the North South Expressway and has experienced a steady growth in passenger footfall, and this has spelled opportunities for many small businesses from a variety of niches, from F&B and retail outlets to entertainment centres and hotel operations.
Perak Transit plans to replicate its bus terminal to different parts of Malaysia. Its expansion plans include Terminal Kampar Putra, Terminal Bidor, Terminal Tronoh and expansion of Terminal AmanJaya phase 2.
Terminal Kampar Putra is Perak Transit’s immediate growth driver. The terminal is strategically located 5 minutes away from University Tunku Abdul Rahman (UTAR) Kampar Campus, and is an in integrated lifestyle hub, which will have its own hotel and other facilities such as badminton courts, gym, cinema, library and bowling alley. It is expected to be a new commercial hub and gathering place for UTAR students.
Terminal Kampar Putra (Phase 1) has commenced its terminal operations at the end of the second quarter of 2019 and is expected to be fully opened in March 2020 with a complete certificate of completion and compliance to be received by Q1 2020.
Dato’ Sri Cheong Kong Fitt is founder and managing director of Perak Transit. He is responsible for the Group’s day to day management as well as setting the corporate vision and direction, including planning and implementing strategic business plans for the Group. Dato’ Sri Cheong Kong Fitt’s brother, Dato’ Cheong Peak Sooi, also serves as an executive director of Perak Transit. Datin Sri Lim Sow Keng is Dato’ Sri Cheong Kong Fitt’s wife.
As at 29 March 2019, the Cheong family effectively own 39.27% stake in Perak Transit and are the Group’s largest shareholders.
(Source: 2018 annual report)
However, Dato’ Sri Cheong Kong Fitt has recently on 17 October 2019 acquired an additional 1,000,000 shares, bringing his direct interest in Perak Transit to 247,080,605 shares (17.37%).
Measure 1: Growth in revenue and profits
Perak Transit has seen respectable growth in revenue and net profit after tax, at compounded annual growth rates (CAGR) of 15.3% of 23.3% respectively from FY2015 to FY2018. As growth in net profit after tax is slightly higher than growth in revenue, we believe that management is efficient in managing its costs. In addition, if we were to annualise the 3Q 2019 results, we can expect the Group to achieve improved financial performance in FY2019.
Measure 2: Profitability
Perak Transit enjoys decent net profit margins of 23.9% – 31.5% due to its monopolistic business advantage of being the only gazetted bus terminal in Ipoh. Return on equity ratios are also at double digits for the past four years indicating proper usage and allocation of shareholders’ funds.
Measure 3: Liquidity
As at 3Q
2019, Perak Transit’s net gearing ratio stood at 0.5x with current ratio of
0.9x and cash ratio of 0.3x. For an asset-heavy company, these ratios are
commendable, and are expected to improve as Terminal Kampar Putra nears
completion and becomes fully operational in the next year.
Round 4: Dividends payout
The Group has been consistently paying out dividends every year. In fact, its dividend per share has increased from approximately RM0.004 per share in FY2015 to RM0.009 per share in FY2018. This shows us that its assets are profitable and cash-generative.
With a closing share price of RM0.23 as at 6 December 2019, Perak Transit is trading at a price of earnings (PE) ratio of 11.12, with an indicative yield of 5.87%. Investors looking for steady dividend distributions and are excited with Perak Transit’s expansion plans can watch this Group closely.
Source: Google Finance