We are ceasing coverage on Perak Transit Berhad (PTB) due to limited re rating catalyst, with expected developments accounted for and priced in while we redeploying resources to widen stock coverage. PTB has proposed to undertake a private placement of up to 10% of its total shares issued, which entails an issuance of up to 63.5m shares that could raise up to RM38.0m based on the illustrative issue price of RM0.60. Bulk of the proceeds will be utilised for partial construction cost for Bidor Sentral, terminal management services projects, urban transport electrification projects and general working capital. We are neutral on this as the placement enables the Group to raise additional funds without having to incur interest expenses but will have a dilutive effect on existing shareholders and EPS. Our last call is Trading Buy with TP of RM1.16. Current forecast should no longer be relied on as basis for recommendation.

• Private Placement to raise up to RM38m. PTB plans to place out up to 10% of its shares to third party investor(s), who will be identified on a later date. This will increase its share capital 634.7m from to 698.2m shares. The issue price will be determined at a later date. Assuming an indicative issue price of RM0.60 Per share, PTB’s placement is expected to raise up to RM38.0m. The placement is subjected to Bursa Securities’ approval and is expected to be completed by 2QFY22.

• Utilisation of proceeds. From the entire sum expected to be raised, RM13.5m (c.35%) will be used for partial construction cost for Bidor Sentral, RM12.0m (c.31%) for general working capital, RM6.8 (c. 18%) for terminal management services projects, RM5.2m (c.14%) for urban transport electrification projects, the remaining for the expenses related to this placement.

• Earnings dilution. The placement will have a dilutive effect on EPS. Based on an enlarged share based of 698.2m, the impact on EPS is estimated to be about -10%, as we are not expecting any material increase in earnings to compensate for the increase in share base. .

Source: PublicInvest Research - 18 Apr 2022