Prolintas Infra Business Trust (PLINTAS, 5320) is debuting on Bursa Main Market today. PLINTAS is Malaysia's first listed business trust, adhering to Shariah principles and managing a portfolio of four revenue- generating highway assets. With a 90% distribution policy, we expect PLINTAS to distribute 6.5sen and 6.9sen per unit for FY24 and F25, translating into yields of 6.8% and 7.2% respectively. BUY with a FV of RM1.00 based on a target yield of 6% over FY24 DPU.

The listing includes an offer for sale of up to 468.7m units, which represents 42.6% of the total units in issue. The institutional offering accounts for approximately 90% of these units, while the remaining portion is reserved for retail investors. No new units will be issued; hence, no IPO proceeds will be directed to PLINTAS.

PLINTAS manages four highway concessions, all with the capacity to generate continuous and substantial cashflows through toll collections. The Ampang-Kuala Lumpur Elevated Highway (AKLEH) concession is expected to conclude in 2037, while the Sistem Lingkaran Lebuhraya Kajang (SILK), Guthrie Corridor Expressway (GCE), and Lebuhraya Kemuning-Shah Alam (LKSA) concessions are slated to end in 2062, averaging an approximate remaining concession period of 32 years. The four highways strategically sit within the Klang Valley, capitalising on the region's robust economic activities. These highways serve as vital arteries, relieving congestion and bolstering connectivity for approximately 500,000 daily road users.

We project PLINTAS' revenue expansion will predominantly stem from a continuous uptick in traffic volume. Our forecasts are based on an assumed annual traffic volume growth rate of around 3% over the next 10 years. Key drivers would attribute to over congestion of public roads, limitations in public transport availability, population expansion alongside development of townships and corridors near the highways, and growing income levels alongside increased affordability of vehicle ownership and toll usage.

According to Frost & Sullivan, toll collection revenue for the Klang Valley’s urban highway industry is forecasted to grow at a Compound Annual Growth Rate (CAGR) of 3.2%, increasing from RM2.7bn in 2017 to RM3.7bn in 2027. This growth trajectory is underpinned by the growing population and urbanisation within the Klang Valley. Additionally, the anticipated growth in household income and the government's initiatives to promote electric vehicle (EV) adoption are poised to fuel the growth in toll revenue.

Source: Rakuten Research - 25 Mar 2024

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