[Substack] Bus Cap Berhad Rides on Malaysia’s Public Transport Replacement Cycle

Bus Cap Berhad enters the market with a straightforward business, but a more compelling investment narrative. At first glance, it is a bus body manufacturer. However, the stronger angle lies in its forward earnings visibility, recurring replacement demand, and exposure to Malaysia’s broader public transport and travel recovery cycle.

According to RHB’s IPO note, Bus Cap’s IPO price of RM0.23 values the Company at only 6.6x FY2027F P/E, while RHB has assigned a fair value of RM0.38, based on 11x FY2027F P/E. This implies a potential return of approximately 66%, suggesting that the IPO valuation remains relatively undemanding when compared against its projected earnings growth and Bursa Malaysia’s small-cap valuation benchmark.  

This forward P/E angle is important because Bus Cap is not merely being assessed based on historical performance. RHB forecasts the Company’s net profit to grow from RM9.7 million in FY2025 to RM11.7 million in FY2026F, RM13.3 million in FY2027F, and RM15.9 million in FY2028F. At the IPO price, this translates into a forward P/E that compresses from 9.1x FY2025 to 7.6x FY2026F, 6.6x FY2027F, and 5.5x FY2028F.  

What makes the Bus Cap story more defensible is the nature of its demand. Bus demand is not purely dependent on discretionary expansion by operators. The express bus industry is supported by a 10-year lifespan regulation, which creates a natural replacement cycle for operators that need to renew their fleets over time. This provides Bus Cap with a recurring demand base, especially as its key customers include bus transport service operators, travel companies and government agencies.  

The broader travel environment also appears supportive. During school holidays, festive periods and long weekends, bus terminals have continued to see strong passenger movement, with mainstream media frequently highlighting packed terminals and higher ticket demand. For the social media team, this is an important narrative to amplify: stronger passenger flow does not immediately mean every operator will order new buses, but it does point to rising fleet utilisation. Over time, higher utilisation can improve operators’ confidence to replace, expand or upgrade their fleet.

Another catalyst that deserves careful positioning is subsidy rationalisation. As fuel subsidies become more targeted, public transport may become more relevant for cost-conscious travellers, especially students, working adults and families travelling during holidays. The government’s broader encouragement of public transport usage also strengthens the long-term relevance of buses within Malaysia’s mobility ecosystem. However, the message should be framed professionally: subsidy reduction is not a direct “instant profit” catalyst for Bus Cap, but it can increase the importance of public transport, support passenger demand, and reinforce the long-term case for fleet renewal.

Operationally, Bus Cap is also preparing for a larger demand cycle. The Company expanded from one production line to three production lines in July 2024, lifting its annual capacity to approximately 168 units. In FY2025, actual output reached 131 units, representing a utilisation rate of around 78%. RHB expects utilisation to improve to around 90%, while the planned new automated plant is expected to shorten production lead time from around four months to three months and improve production efficiency by approximately 15% by FY2029.  

This capacity expansion is meaningful because it gives Bus Cap room to convert industry demand into revenue growth. The IPO proceeds will mainly be used for the construction of a new factory, purchase of new machines and working capital, which are directly linked to production scalability and operating efficiency.