Investment Highlights

• Stock idea. Suria Capital Holdings (Suria) has been listed on the Main Market of Bursa Malaysia since 1996. The group embarked on the business of Sabah port operations after the privatisation of the state’s ports from Sabah Ports Authority in 2004.

• Presently, Suria operates all 8 main seaports in Sabah (Exhibit 2), with Sapangar Bay Container Port as the flagship port. As at 31 Dec 2020, Suria has 1,099 local employees supporting its operations.

• Suria is in the midst of expanding its flagship port following the appointment of the main contractor, a 60:40 JV of WCT Holdings Bhd and China Communications Construction Company (M) Sdn Bhd, in July 2021.

• The expansion is expected to be completed in 2025F. Upon the completion of the expansion, Sapangar Bay Container Port’s handling capacity will increase from 500K TEUs (+40%) to 1.25mil TEUs per year.

• Additionally, Suria is expanding Sapangar Bay Oil Terminal with the addition of more berths to accommodate bigger tankers for a larger supply of bunker and fresh water. This is envisaged to be completed this year.

• Meanwhile, Suria has been appealing to the Sabah state government for a tariff revision since mid-2019. Based on the privatisation agreement, there is a provision that allows for application for a revision after 5 years of the concession period. The proposed tariff revision includes container and general cargo tariffs.

• Suria’s FY21 revenue improved by 10% to RM245mil due to an increase in the volume of TEUs (+11% YoY) and higher construction services for concession infrastructure. Coupled with enhancements in operating profit margin, net profit grew 21% in FY21.

• Operational risks include a worsening Covid-19 situation that would affect economic recovery. Also, a prolonged period of high fuel costs would exert downward pressure on operating profit margins.

Source: AmInvest Research - 16 Mar 2022