Investment Highlights

• We maintain our forecasts and fair value of RM1.21 based on 15x its FY22F EPS, at a 30% discount to our FY22F target PE of 22x for Malaysia Airports, and adjusted for a 3% discount to reflect a 2-star ESG rating as appraised by us (Exhibit 3). We use Malaysia Airport as the valuation benchmark for Perak Transit as we see many similarities between this operator of modern public transport terminals and an airport operator. Maintain BUY.

• Perak Transit has proposed a 1-for-4 free 5-year warrant issue of up to 158.7mil new warrants (based on the current issued shares of 634.7mil excluding treasury shares).

• Based on an illustrative exercise price of RM0.88, on full exercise of the warrants (that shall also bring in RM139.6mil proceeds), Perak Transit’s FY22F EPS would be diluted by 12% and consequently, our FV would be reduced by 12% to RM1.07. We are neutral on the latest development.

• We continue to like Perak Transit for:

1. Its unique business model, i.e. the operation of modern public transport terminals that emulate airports with spacious and brightly lit shopping, dining and waiting areas, and clean public facilities particularly the washrooms. These entice visitors to spend more money and time in the terminal prior to their departure or upon their arrival, or while sending off or picking up their loved ones. This captive traffic is monetized in the form of rental incomes from commercial units and advertising space within the terminal;
2. It having proven the commercial viability of this business model in its Terminal Meru Raya in Ipoh (an interstate transportation hub) and the newly opened Kampar Putra Sentral. Kampar Putra Sentral is also buoyed by a high and fast-growing student population in the campus town of Kampar. This student population has high propensity to travel during school breaks and festivities, as well as during weekends for leisure; and
3. The vast opportunities to replicate this successful business model. Already, it has at least three more projects in the pipeline, namely, in Bidor, Tronoh and a terminal management contract for an Alor Setar terminal.

• At 7–9x forward earnings, we believe Perak Transit offers investors a good opportunity to own a defensive public infrastructure business that is replicable for growth at bargain valuations.

Source: AmInvest Research - 4 Jun 2021