Terminal operator. Listed in Oct 2016, Perak Transit Berhad (PTRANS) is a leading integrated public transportation terminal (IPTT) operator with core businesses mainly derived from (i) Integrated public transportation terminal operations; (ii) Providing public stage bus and express bus services, and bus charter and advertising services; (iii) Petrol stations operations; and (iv) Mining management operation (See Figure#1 for revenue breakdown).

Multiple new income streams to drive growth. PTRANS is expected to register a stronger footfall in its current two terminals -Terminal Meru Raya and Kampar Putra Sentral following the ease in interstate travel restriction in 4Q21. Kampar Putra Sentral, which commenced in Sept 20 and strategically surrounded by universities such as UTAR and TARC, will see a higher contribution in terms of higher A&P (advertising and promotion) and rental on the back of the expiry of the free-rental period and a higher occupancy rate (50% as at Feb 2022). Other than that, PTRANS’ long-term growth will be supported by multiple new income streams such as (i) two new IPTTs, namely Bidor Sentral and Terminal Tronoh, which are slated to commence by FY23 and FY25, respectively (ii) managing third-party bus terminals (currently have two contracts; Figure#3); (iii) transforming some commercial areas in PTRANS’ terminals into logistics hubs.

Undemanding Valuation. After plunging 23% from a high of RM0.715 to a 52-week low of RM0.545 yesterday, PTRANS’ risk-reward ratio had turned attractive, underpinned by an undemanding valuation of 6.2x FY22E P/E (33% and 50% discount against its 5-year average and peers average of 9.3x and 12.5x, respectively) coupled with attractive 5.5% dividend yield.

Are interest rates upcycle and higher crude oil prices affect PTRANS bottomline? Although the market may speculate the inevitable rate hike by BNM in 2H22 will affect fixed asset operators such as REITS due to increase in the cost of borrowing, we note that majority of PTRANS’ borrowing is dominated by Sukuk Murabahah - 98% of total borrowing in 4QFY21, with an outstanding RM100m of the RM500m facility unutilized – where PTRANS have interest rate cap as preventive measure (source). Also, the increasing diesel price that was driven by the surging global oil prices will not impact PTRANS materially much as the group’s bus have been pumping subsided diesel which is fixed at RM 1.881/litre (vs current price of RM2.15).

Grossly oversold. Technically, PTRANS is grossly oversold. Any weakness from current price towards key supports of RM0.525 level provides a good opportunity to accumulate. A strong breakout above RM0.60 will spur prices higher to RM 0.65 - 0.67 levels. Cut loss at RM0.49.

Source: Hong Leong Investment Bank Research - 11 Mar 2022