The Causeway Link Bus You Take to JB? It’s Now a Public Listed Stock

Singaporeans or Malaysians who frequently cross the Johor-Singapore border will find this yellow bus very familiar.

Known affectionately as the CW bus, the acronym for Causeway Link, this bright yellow bus has frequently been my mode of transport, especially since it departs conveniently from the city centre – Queen Street near Bugis.

There was also a period when it was my go-to bus company for commuting between Singapore and Kuala Lumpur. It also provides frequent and predictable commute between the JB CIQ and Johor airport.

And surprise – it is now a listed stock on the Bursa Malaysia stock exchange.

Business Model

Before diving into the figures, the trans-border commute business is something that I think would be evergreen and growing. With more complaints on the rising house prices in Singapore, the number of condominiums and landed house projects has been mushrooming in the southern part of Johor.

The allure of earning the Sing dollar, yet be back in Malaysia to spend it, is so enticing that most people opt to do the daily commute despite the sacrifice they make in their sleep schedules.

So right off the bat, this is a business in which I have high confidence will continue to grow and remain relevant for the next 20 years, barring any unforeseen black swan events.

Trading under the listed name of HI Mobility Berhad (KLSE: HI), HI, which stands for Handal Indah, is the ultimate holding company of Handal Indah, which is principally involved in the provision of bus transportation services. It is the biggest cross-border bus operator in both countries, with its IPO raising RM 116 million in an initial public offering that values the firm at RM 608 million.

HI operations’s also encompasses Melaka, another favourite destination for Singaporeans.

Financial snapshot

To complement the financials, I’ve summarised some crucial information in the table below.

	FY 2022	FY 2023	FY 2024
Revenue Growth YoY	–	+380%	+174%
Gross margin	–	27.6%	30.5%
Operating margin	–	21.2%	24.0%
Net margin	–	16.8%	16.7%

For someone pretty familiar with HI, I am surprised that the business is still growing at triple digits growth, especially given its 20 year history of operations.

FY2023 revenue was up +380% against its previous year, with FY2024 revenue up +174% at RM 208 million.

Its gross margins for FY2023 and 2024 range around 27-30%. Given that it is somewhat an asset-intensive business which requires investments on buses, not to mention manpower, 30% is a rather normal range. Operating margin ranges around 21-24% while net margins are quite stable around 16+%.

IPO proceeds

RM70.0 million or 60.4% of the gross proceeds from the IPO will be allocated to HI’s bus fleet expansion and electrification, covering cross-border services, intracity services and intercity services. HI is embracing the Malaysia’s National Energy Policy 2022-2040 and National Energy Transition Roadmap (“NETR”) which aims to increase the share of electric vehicles and public transport model share to over 40%.

That also justifies HI’s plans to expand its EV-charging infrastructure.

The founder and Executives

HI was founded by Lim Han Weng, the same founder behind Yinson Holdings Berhad (KLSE: YINSON). Mr Lim has had humble beginnings, building Yinson into one of the most notable multi bagger stocks in Bursa Malaysia.

While it is safe to assume that CEO Lim Chern Chuen, son of Mr Lim, would possess the tenacity and prudence of his father, the business model and geographical reach of HI is very different from Yinson, which has businesses in many parts of the world.

The planned 20-30$ fleet expansion in the short term sends a strong signal that the Johor and Singapore cross border transport is the low-hanging and sure-win area of success. Thus, I wouldn’t be surprised if revenue continues to grow at high double digits or even replicates its triple-digit growth.

The Singapore and Johor cross border catalyst

I view the bus transportation business as a resilient business in normal times, and the unique proposition of HI being a cross border transport provider gives it an added edge. But as history has shown, this infrastructure business is still susceptible to tough times during the pandemic period.

The cross-border transport services between Malaysia’s Johor state and Singapore will continue to get higher demand, as both Malaysians working in Singapore and Singaporeans will be keen to enjoy the best of both worlds – earning in Singapore dollars while spending and living in the comfort of Malaysia. With the gap between the Singapore Dollar and Malaysian Ringgit increasing over the years, it is safe to assume that this would stay as status quo, thus justifying HI’s business model as of now.

Personally, I see investing in the stock of a transportation service company that benefits from cross border travel as a far smaller risk to take than buying properties in the JB area purely for investment purposes.

Verdict

HI’s IPO generated less fanfare than other companies, which hints that it might not be valued too absurdly compared to other loud IPOs. While tran-states long journey transportation companies’ earnings have been mostly unpredictable, HI’s laser focus on the cross-border transport business does put it in a competitive edge over its peers.

It is not a sexy business, and I doubt Malaysians outside of Johor care much about this bus company.

But hey, the unsexiest of them all often turn out to be the fairytale princess when it comes to shareholder value creation, just like every Disney princess.