Key Man of GMB
As of April 2011, there are 3,037 green minibuses in Hong Kong. The average daily passenger volume was 1.506 million people last year. As for the red non- GMB, there are only 1,313 with the average daily passenger volume of 380,000 last year. When receiving our interview, AMS Transport (0077) CEO and Executive Director Chan Man Chun said for decades the GMB policy adopted by Hong Kong government helped strengthening the local GMB market. In particular, the listing has rendered an unprecedented opportunity to lead the minibus company to the road heading to institutionalization and entrepreneurialism.
Chan said the period from 1975 to 1989 was a brilliant development stage when the business was mainly operated by family-pragmatic management. In 1989, Chan introduced largescale optimization of management soon after he started his career in the company. Apart from the main route in the Southern District in HK Island, he sought to expand its business and successfully won by bidding the route from Tsuen Wan to Shatin, the first GMB route outside HK Island. Chen added, from 2000 to 2003, the management turned to adopt a strategy of acquisitions, including the acquisition of the routes in Tai Po of the New Territories. The network of the Group eventually was stretched from the Southern District to Kowloon and the New Territories.
After years of business expansion, the Group took what Chan believes to be the best timing to list in 2004, the year after SARS, at offer price of HK$1.07. Since the establishment of funds platform and the optimization of management structure, the management sees the opportunity from the frequent travelers from the mainland to Hong Kong. It then started large-scale acquisition of Chinalink Express Holdings Limited specializing in cross-border travelling business. It was the management’s idea that the local GMB business was considered the core business while China-Hong Kong cross-boarder travel business aimed to provide synergy effect to the business. In April 2011, the Group disposed of the cross-border business of Chinalink Express Holdings Limited for a consideration of HK$300 million to Kwoon Chung Bus (0306).
The data shows that the gearing level in 2011 was 61.8%, up 3.3% year-on-year. Chan said that was due to the use of HK$32 million to acquire GMB routes between Central and Causeway Bay and the Southern District early 2011. He expects the gearing level will turn down to a reasonable level next year. When asked how he prepared to optimize the Group’s business to boost its operating income, he admitted that 2011 is a difficult year for the Group business and a more conservative strategy will be adopted. He expects a trend of fare rise will be coming over the next three months which will hopefully make up the accelerating growth in operating costs of the business. However, due to the market culture that minibus fares should not be increased frequently and the huge opposition from the District Council, Chan urged the government to allow the GMB companies to increase the fares once a year, in order to enhance long-term competitiveness of the industry and to avoid GMB operators being forced to close down. Other than fare rise, Chan also tried to expand its route scope, aiming at enhancing the operational potential.
The Group currently operates 54 green mini bus routes and 342 green mini buses. It is generally a misconception that the larger the fleet size, the higher the profitability. Chan pointed out that profit making is on how the management to fully utilize each minibus to operate the existing routes with cost-effectiveness, rather than on fleet size or number of routes. In other words, each mini green bus, in an average age of 7.7 years and running 300 km each day, has to meet certain target. For example, 300 minibuses can receive a turnover of HK$3 million each day if each achieves a turnover of HK$10,000 per day.
Pursuant to the annual result as of March this year, the investment value of the stock rests not only on the dividend payout of 12 cents but also the bonus share for every ten shares. Chan expressed with a smile that it is fine to invest in AMS Transport; yet, investors, though will not need to panic about high volatility of the price, should not expect stunning and outstanding performances of the stock which will normally be trading in range. He confessed that the daily turnover and liquidity of the stock is not high as 70% equity of the stock is held by major shareholders and about 10% is held by funds. As stocks will normally show bullish trends before and after the result announcement, investors can regard AMS Transport as a dividend-oriented stock with stable yield.