Investment Highlights

• We maintain our forecasts and fair value (FV) of RM1.08 for Perak Transit, based on 15x fully-diluted FY22F EPS (with no ESG adjustment for its 3-star rating). This is at a 30% discount to our FY22F target PE of 22x for Malaysia Airports.

• 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 recommendation.

• We believe that Perak Transit is on track to transform idle areas in its existing terminals into a logistics hub. It has secured two tenants comprising a courier services thirdparty logistics and a fast-growing delivery superapp startup, taking up an area of 10–30% in the terminals for both Terminal Meru Raya and Kampar Putra Sentral. This helps to improve the lettable area at the terminal, footfall and hence revenues for its IPTT operations.

• We expect that the rental contribution from Kampar Putra Terminal will improve following the relaxation of movement restrictions, premised on: (i) the footfall recovery at the terminal once passengers and university traffic return when interstate travel is allowed; (ii) improved occupancy rate at the terminal to 60% (from 50% guided in 2Q). To recap, the commercial tenants at the terminal are currently enjoying free rental amidst the MCO.

• We gather that the construction for Bidor Sentral remains on track, and the piling work is expected to commence at the end of this month. To recap, Bidor Sentral's revenue contribution is expected to kick in in 2HFY23.

• For terminal management contracts (TMC), we believe that Perak Transit will continue to talk to third-party bus terminals for potential new projects/contracts although the discussions may have slowed down during the early stage of National Recovery Plan (NRP). As for existing contracts, we maintain our estimate that Terminal Bas Shahab Perdana should commence operation by April 2022 while revenue from Terminal Sentral Kuantan is stable as the terminal management fees are paid annually on a contract basis.

Source: AmInvest Research - 14 Oct 2021