PETALING JAYA: Despite the stalled domestic travelling activities due to the raging Covid-19 pandemic over the last 12 months, Perak Transit Bhd is bullish on the outlook of the public transportation industry in the long run, which will be driven by economic growth led by government initiatives.
Given the bright prospect, the company is eyeing more contracts that will provide a steady income stream to its business operations.
This include building and managing its third integrated public transportation terminal (IPTT), as well as tendering for 10 contracts to manage other existing IPTTs located in Perak and outside of the state.
Its newly appointed director Datuk Gazali Jalal said the group is targeting about a RM12mil annual revenue contribution from managing bus terminals, better known as terminal management services (TMS).
“The TMS services involve minimal capital expenditure with faster growth and recurring earnings, ” he told StarBiz, adding that the renovation cost per terminal would be less than RM10mil and the renovation period is also shorter by between three and six months.
However, developing a new IPTT will cost more than RM100mil and will take two years to complete, added Gazali.
On Jan 14, Perak Transit announced its first venture into a third-party TMS contract and the first operation of an IPTT outside Perak.
The group is collaborating with Energetic Point Sdn Bhd (EPSB) to operate Terminal Sentral Kuantan (TSK) in Pahang, which is an IPTT and a hub for express buses and local city buses serving the east coast of Peninsular Malaysia.
The contract will involve managing the TSK IPTT as well as some investments to upgrade the terminal in order to enhance service levels.
Under the contract, EPSB will pay RM1.2mil to Perak Transit in the first year with a 3% annual increment for nine years until 2030.
“The group is currently assessing at least another 10 IPTTs in Malaysia.
“By using TSK as a guidance, the revenue contribution from TMS is estimated at about RM12mil per year from the 10 terminals, ” explained Gazali.
In addition, the group is targeting to commence the construction of its third IPTT, Bidor Sentral, in the second half of the year at an estimated cost of RM115mil.
The construction is slated for completion in two years, he added.
Ghazali also noted that the expansion of its own bus terminals will continue to be the key growth for the group, while the TMS business will help with its expansion plan.
At present, about 57% of the group’s total revenue is generated from its IPTT business, mainly from Terminal Meru Raya and Terminal Kampar Putra Sentral in Perak, which have a combined total leaseable area of 51,440 sq ft and 409,300 sq ft, respectively.
The remaining revenue comes from its petrol station and bus operations, which contribute about 20% and 23%, respectively.
Gazali pointed out that public transportation will remain an essential service in Malaysia.
He also expects the demand for public transportation to continue growing despite the Covid-19 challenges.
“I believe that demand will be driven by the country’s economic growth coupled with the government’s initiatives to develop and improve on our public transportation system, ” added Gazali.
Meanwhile, AmInvestment Research has initiated coverage on Perak Transit with a “buy” call.
“We like Perak Transit for its unique business model such as operating modern IPTTs that emulate airports with spacious and brightly-lit shopping, dining and waiting areas, and clean public facilities.
“This entices visitors and commuters to spend more money and time at the terminal.
“This captive traffic is monetised in the form of rental income from commercial units and advertising space within the terminal, ” said AmInvest in its latest report.
Kenanga Research in its report expects the group’s first third-party TMS contract to mark a promising start to its new venture.
It pointed out that Perak Transit is the only listed company in the bus service and terminal management business and faces little competition in managing third-party terminals.
“We are confident that the group can secure another four to five TMS contracts this year and more beyond that, ” it added.
Gazali, meanwhile, expects Perak Transit’s earnings to not be affected by the MCO 2.0, as the income from the rental of advertising and promotional space for both Terminal Meru Raya and Kampar Putra Sentral was secured for early renewal in 2021.
“The rental income from both the advertising and promotional category, and shops and kiosks are stable as the contracts are signed on a fixed-term basis, ” he said.
Source: https://www.thestar.com.my/business/business-news/2021/02/01/perak-transit-eyeing-more-contracts-this-year