This article first appeared in The Edge Malaysia Weekly on March 17, 2025 - March 23, 2025

WHILE bus operators may be perceived to be operating in a sunset industry, especially given the lower number of active vehicle permits for buses in 2023 compared to pre-pandemic levels, certain companies are not only enduring but even continue to thrive.

Main Market-bound HI Mobility Bhd (KL:HI), better known for its “Causeway Link” brand, remains resilient in a challenging landscape, having grown its revenue by 38.3% to RM204.27 million in the nine-month financial period ended Oct 31, 2024 (FPE2025), compared to RM147.68 million in the previous corresponding period, as net profit increased 39.2% year on year to RM33.69 million, from RM24.24 million.

This impressive growth was underpinned by its unique position as the sole Malaysian bus company operating the critical Johor Bahru-Singapore (JB-SG) cross-border services. Holding 150 omnibus licences from Singapore’s Land Transport Authority, the cross-border segment forms 59.9% of the Johor-based company’s total revenue.

While many see the Rapid Transit System Link (RTS Link) as a threat, CEO Lim Chern Chuen believes it will complement HI Mobility’s bus services. The RTS Link is scheduled to begin operations by end-2026 or early 2027, transporting 10,000 passengers per hour in each direction.

Chern Chuen, better known as CC, is the eldest son of Lim Han Weng and the elder brother of Lim Chern Yuan, executive chairman and group CEO of Yinson Holdings Bhd (KL:YINSON), an operator of eight floating production storage and offloading (FPSO) vessels that had its start in logistics.

CC says HI Mobility’s main customers — daily commuters of the Causeway — are usually price-sensitive. Based on his observation, the high upfront investments made in the RTS may result in fares that are much higher than its bus tickets. “We have had instances in which we increased the price by even 10 sen and received many complaints. It’s a very price-sensitive segment, especially because they are frequent travellers, and small differences can add up in their monthly bills.”

Another important aspect is user experience. “For us, you have direct buses going into the CIQ (customs, immigration and quarantine complex) without the walk. After the CIQ, there is another bus directly waiting to bring you to the destination; whereas if you are taking the RTS, there is another 600m walk, you go through a bunch of gates, then you take the train, and the likelihood is you will need to take another bus as well.”

CC emphasises that buses offer end-to-end multi-point options, unlike the single point-to-point service of the RTS. As such, there will also be greater emphasis on first- and last-mile solutions for the RTS stations of Bukit Chagar in Johor and Woodlands North in Singapore, which will complement bus services. (First- and last-mile solutions refer to transport options that help people travel the initial and final parts of their journey, often connecting their homes or workplaces to larger, main transport networks [such as trains or buses]. These solutions are essential for making public transit systems more accessible and efficient.)

In addition, the RTS will alleviate congestion on the Causeway and improved traffic flow will help lower operating costs for buses, which tend to be high when they remain idle. This will enable more trips, making the service more cost-efficient.

So far, HI Mobility’s ridership in its JB-SG cross-border services in the financial year ended Jan 31, 2024 (FY2024) stood at 15.672 million, about 69.8% higher than its pre-pandemic ridership of 9.229 million. CC believes a 10% y-o-y growth is achievable this year.

He adds that unlike the previous trend of Malaysian workers commuting to Singapore, there is now a noticeable increase in the number of Singaporeans travelling to Malaysia for both recreational and business purposes. He notes a rising trend of Singaporean businesses setting up their base in Johor, which is contributing to the uptick in cross-border travel.

Other JB-SG cross-border bus service operators include Singapore Exchange-listed SBS Transit Ltd, which is 75%-owned by ComfortDelGro Corp Ltd, and SMRT Buses Ltd, both based in Singapore.

According to the independent assessment report in its listing prospectus, HI Mobility’s profit margin of 16% surpasses SBS Transit’s 4.5% and SMRT Buses’ 3.9%. The higher profitability can be attributed to a more favourable operating landscape for HI Mobility, where the costs of labour and consumables such as fuel and spare parts, which account for about 65% of its operating expenses, are lower than those of its Singaporean counterparts. For example, labour and fuel comprise 68.5% of SBS Transit’s operating costs; the figure is unavailable for government-controlled SMRT Buses.

In terms of market valuation, SBS Transit is trading at a price-earnings (PE) multiple of 12 times, while HI Mobility’s initial public offering (IPO) is priced at an annualised PE of 13.6 times.

HI Mobility has two revenue streams. The first is ticket sales to the public, which account for 66.5% of its revenue. The remaining 33.5% is derived from contracted and other services provided to government bodies and corporations.

The contracted services operate on a gross cost model, where the company is paid a fixed fee per vehicle per kilometre of services rendered. The Stage Bus Service Transformation (SBST) ope­rations and the Rapid Bus Route Outsourcing Programme are the largest within HI Mobility, with an estimated value of RM314.9 million.

These contracts, won through competitive tendering, typically have a duration of five years, with potential extensions of two or three years.

Started in 2015, the SBST programme was introduced to increase bus ridership and reduce road traffic by funding bus operators to enhance the sustainability of their services. In addition, HI Mobility operates free bus services in Johor Bahru, Pengerang and Sepang that are funded by the Johor and Selangor state governments.

Gross contracts are essential to HI Mobility’s operations, as they help match cash flow with capital expenditure (capex) when ordering new buses, which typically have a lifespan of 15 years. CC explains, “A gross cost contract for the first five years pays for the asset itself, and then for the remaining 10 years, we can deploy the buses onto multiple contracts with a fully paid-off asset and redeploy them into chartered services.”

Looking ahead, he is optimistic that the governments of Malaysia and Singapore are increasingly recognising the crucial role that buses play. He explains, “A lot of the data from established cities shows that large-capacity transport is essential. E-hailing services and taxis add more congestion to the roads and reduce throughput. I believe governments are becoming more savvy in deploying first- and last-mile solutions, alongside the rail systems, to address these challenges.”

To improve mobility in the Greater Johor Bahru area, major developments such as transport and infrastructure projects in the state are in the works. They include the Johor-Singapore Special Economic Zone, Forest City Special Financial Zone, Pengerang Integrated Petroleum Complex and Desaru Coast Destination Resort, which are also expected to stimulate economic activity, which in turn is anticipated to boost demand for intercity, intracity and JB-SG cross-border bus services.

In addition, the two governments’ initiatives to reduce JB-SG border crossing times could encourage more travellers to use cross-border bus services. This is further supported by Johor Bahru’s and Singapore’s growing populations, which increased 2.2% and 2% respectively in 2024.

All of this bodes well for HI Mobility.

HI Mobility will raise a total of RM115.9 million from its Main Market IPO scheduled for March 28. It has earmarked RM70 million (60.4%) for bus fleet expansion and electrification, RM15 million (12.9%) for the expansion of electric vehicle (EV) charging infrastructure, with installations planned for various depots and routes, as well as RM5 million (4.4%) for the purchase and installation of hardware, integration of artificial intelligence to enhance vehicle monitoring and driver management.

On electrification, CC says the company will initially prioritise investments in infrastructure, as costs tend to rise over time. By establishing the necessary electrification infrastructure, the company will enable the scalability of EV buses, as prices are expected to fall with technological advancements.

Although the initial investment for EV buses is higher than that for diesel-powered buses, he emphasises that the operating costs of EV buses are lower than those of diesel-powered buses, even after factoring in subsidised diesel prices. In addition, Singapore will begin enforcing stricter smoke emission limits on foreign commercial diesel vehicles from April 2026.

The first-mover advantage in EV buses and infrastructure also helps HI Mobility establish guardrails, making it harder for its competitors to compete.

Currently, it operates a fleet of 683 buses, including 53 electric buses, primarily from the Chinese marque Foton Motor. To cater for higher demand, it has ordered 55 new buses, 10 of which are electric.

CC also explains that the seamless functioning of HI Mobility’s business model is largely facilitated by its advanced digital infrastructure. This includes the operational control centre (OCC), on-board ICT systems installed in its buses, and online applications such as websites, mobile applications and third-party digital systems.

The OCC enables real-time tracking of bus locations, ensuring adherence to schedules and routes, and on-board monitoring of consumption data and driver behaviour. As such, it plays a critical role by providing centralised connectivity, management and technical support for the company’s buses, depots, drivers and ticketing operations.

From the commuter’s perspective, its digital infrastructure offers convenience and enhances the overall user experience. These customer-facing solutions include journey planning tools, cashless payment systems and top-up services.

Under this approach, CC sees the modular and scalable business model as a robust platform to facilitate seamless business expansion and revenue growth.

For example, the company may add routes within current service areas and expand into new regions, replicating successful local intracity bus services in other cities, towns and suburban areas to foster business growth.

The company’s expansion from a Johor-based entity extending its reach to the Klang Valley and Melaka exemplifies the effectiveness of this model.

Currently, HI Mobility has not established a formal dividend policy, as it is focused on growth. CC notes, however, that dividends have been distributed in the past and are expected to continue in the future.

The IPO includes the sale of 35 million existing shares for RM42.7 million, accounting for 7% of its enlarged share capital, by controlling shareholder Han Weng, who is also the substantial shareholder of offshore support vessel firm Lianson Fleet Group Bhd (KL:LFG).

Post-listing, his direct stake will fall to 54%, while he holds a 6.5% indirect stake through his wife, Bah Kim Lian, who is also HI Mobility’s non-executive director. 

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