PETALING JAYA: Perak Transit Bhd may offer investors a good opportunity to own a defensive public infrastructure business that can be replicated for growth at bargain valuations, says AmInvestment Bank Research.

       The research house is maintaining its “buy” call and forecasts on the group but has reduced Perak Transit’s fair value by 13% to RM1.05 from RM1.21 earlier to reflect the dilution from the group’s recently completed issue of one free warrant for every four shares.

       The group is slated to announce its second quarter results for financial year 2021 (FY21) tomorrow.

       In its latest report, AmInvestment Research said it expects Perak Transit to maintain resilient results for the quarter.

       “We expect Perak Transit to announce a flattish second-quarter FY21 results but this is commendable, given the challenging operating condition on the heels of the reintroduction of the movement control order (MCO) since May,” it added

       Cumulatively, AmInvestment Research said its assumption of first-half FY21 net profit of between RM25mil and RM29mil would account for 51%-59% of its full-year forecast of RM49.3mil.

       This would also make up about 49%-57% of consensus full-year estimate of RM50.9mil.

       This will translate to an earnings increase of 50%-74% year-on-year, the research house noted.

       AmInvestment Research also expects the group’s strong earnings growth will be underpinned by higher contribution from its integrated public transport terminal operation.

       Despite the MCO, the research house said “the group’s resilient performance will be contributed by the locked-in incomes from advertising, project facilitation fees as well as cost containment efforts and lower financing cost.”

       Both advertising and project facilitation fees generally contributed over 95% of the revenue from the group’s terminals business, it said.

       While muted results are expected from the group’s petrol station and bus transportation operations, AmInvestment Research is unperturbed as “they are not Perak Transit’s key earnings contributors and growth drivers.”

       The research house added: “We continue to like Perak Transit for its unique business model.”

       The group is involved in operating modern public transport terminals that emulate airports with spacious and brightly-lit shopping, dining and waiting areas as well as clean public facilities, particularly the washrooms.

       “These entice visitors to spend more money and time in the terminal prior to their departure or upon their arrival, or while sending off or picking up their loved ones.

       “This captive traffic is monetised in the form of rental incomes from commercial units and advertising space within the terminal,” said AmInvestment Research.

       It has also proven the commercial viability of this business model in its Terminal Meru Raya in Ipoh, which is an interstate transportation hub, and the newly opened Kampar Putra Sentral.

       Kampar Putra Sentral is buoyed by a fast-growing student population in the campus town of Kampar.

       Furthermore, Perak Transit has vast opportunities to replicate the successful business model via its three projects in the pipeline, namely in Bidor, Tronoh and Alor Setar.

       Perak Transit closed 1.5 sen, or 2.63%, higher yesterday at 58 sen, giving it a market capitalisation of RM370.95mil.

       At seven to eight times forward earnings, the brokerage noted that the company remains a good investment at bargain valuations.