KUALA LUMPUR (March 7): Johor-based bus company HI Mobility Bhd has launched its initial public offering (IPO) that could raise up to RM115.9 million from the Main Market of Bursa Malaysia.

The IPO, priced at RM1.22 per share, comprises the issuance of 95 million new shares and an offer for sale of 35 million existing shares, according to its prospectus released on Friday. Collectively, the listing will offer investors a 26% stake in the company.

Application for the IPO will close on March 19, with the company scheduled for listing on March 28.

HI Mobility will have a market capitalisation of RM610 million upon listing based on the IPO price, valuing the company at 18.4 times its earnings for the financial year ended January 31, 2024 (FY2024).

In FY2024, the company made a net profit of RM45.1 million on revenue of RM207.7 million.

HI Mobility is the sole Malaysian bus operator providing vital Johor Bahru-Singapore cross-border bus services, connecting two bustling cities through one of the busiest land border crossings in the world.

Chief executive officer Lim Chern Chuen attributed the company’s success to hitting the sweet spot between travel experience and the right price.

“Bus services are really about practical, reliable, everyday transportation. Moving forward, we plan to capitalise on our core competencies in the provision of cross-border and local bus services supported by our vehicle fleet, depots and digital infrastructure to seize potential business expansion and growth opportunities in Malaysia,” he added.

Commenting on the cross-border Rapid Transit System Link (RTS Link) scheduled to begin operations by early 2027, Lim sees the development as being complementary to its bus operations rather than a threat.

He explained that buses offer end-to-end multi-point options rather than the single point-to-point service of the RTS. As such, there will be a lot more emphasis on the first and last-mile solutions surrounding the RTS stations of Bukit Chagar in Johor and Woodlands North in Singapore, which will benefit bus services.

Another aspect is that once the RTS starts operating, it will alleviate congestion in the Johor-Singapore Causeway. Improved traffic flow will help lower the operating costs of buses, which are high when they remain stagnant. This will enable more trips, making the service more cost-efficient.

Furthermore, he explained that its main customers — daily commuters of the causeway — are usually price sensitive, therefore the RTS is not seen as a direct threat to the company.

From the IPO gross proceeds of RM115.9 million, RM70 million (60.4%) has been earmarked for bus fleet expansion and electrification. The company is also setting aside RM15 million (12.9%) for the expansion of electric vehicle (EV) charging infrastructure, with installations planned for various depots and routes.

On electrification, Lim shared that the company will prioritise investments in infrastructure first, as costs increase over time. Establishing electrification infrastructure also enables the scalability of EV buses, whose prices will decrease with technological advancements.

While the initial outlay for EV buses is higher than for diesel-powered buses, Lim stressed that the operating costs of EV buses are lower than those of diesel-powered buses, even with subsidised diesel prices.

As of February this year, the company was operating a fleet of 683 buses, including 53 electric buses. To cater to higher demand, it has ordered 55 new buses, of which 10 are electric.

The company is allocating RM5 million (4.4%) for the purchase and installation of hardware, integration of artificial intelligence to enhance vehicle monitoring and driver management. The remaining 22.3% is intended for working capital and to defray listing expenses.

Meanwhile, a sum of RM42.7 million from the offer for sale of existing shares will accrue entirely to controlling shareholder Lim Han Weng, who will pare his direct stake to 54% upon listing while holding a 6.5% indirect stake through his wife Bah Kim Lian, who is also HI Mobility’s non-executive director.

Maybank Investment Bank is the IPO’s principal adviser, sole placement agent and sole underwriter.