Summary

• Trip to the East. We recently took a trip to East Malaysia and came away feeling fruitful of the journey after being equipped with better insights of the operating landscapes at Sabah and Samalaju Industrial Park, Sarawak. We were briefed on the current operations, future plans and undertook site visits over 4 companies, namely; Suria Capital Holdings Bhd (SURIA), OM Holdings Ltd (OMH), Cahya Mata Sarawak Bhd (CMSB) and Bintulu Port Holdings Bhd (BIPORT).

• Not discounting East Malaysia as an economic powerhouse. In 2021, both Sabah and Sarawak GDP rose 1.1% YoY and 2.9% YoY to RM78.70bn and RM131.20bn respectively. Collectively, the 2 states were ranked in top 6 for the contribution makes up to approximately 15.3% of 2021 of Malaysia’s GDP at RM1.37trn.

• Leveraging onto higher Budget allocation. Recall that allocation to East Malaysia (under Budget 2023) continues to make bigger strides with cumulative amount at RM11.70bn for works related to infrastructure projects in the water, electricity, roads, health and education sector. These comprise of RM6.30bn for Sabah and RM5.40bn to Sarawak. The figure is also well above the combined RM9.83bn for both the aforementioned states allocation under Budget 2022.

• Suria Capital Holdings Bhd (HOLD; TP: RM1.12) will be focusing on their ongoing execution of ports expansion plan. We understand that the upgrade of port facilities is necessary to upstage the group into a new level in order to position the group as a transhipment hub to serve the BIMP-EAGA sub-region participating countries.

• OM Holdings Ltd (BUY; TP: RM2.86) aims to generate higher production output in FY23 and commencing the production of Metalic Silicon (MetSi) in December 2022. Expansions of existing production will strengthen their position as a vertically integrated manganese ore and ferroalloy player, while the acquisition of the remaining 25.0% stakes in both OM Material (Sarawak) Sdn Bhd and OM Materials (Samalaju) Sdn Bhd will be earnings accretive over the long run.

• Cahya Mata Sarawak Bhd (NR; TP: RM1.29) rides onto a revenue stream from the first yellow phosphate production plant in Malaysia. Through 60.0% owned Malaysian Phosphate Additives Sarawak (MPAS) complex, CMSB aims to commission 4 furnaces by December 2022. The phosphorous and derivatives market is expected to deliver improvement in coming years, supported by the higher usage in the lithium iron phosphate battery market and fertilisers application.

• Bintulu Port Holdings Bhd (NR; TP: RM5.98) will be leveraging onto the existing and upcoming industrial players relocation or expansion plans. The Samalaju Industrial Port (SIP) that covers approximately 393.0-ha is strategically located and features a modern deep-sea port operated by BIPORT can handle both bulk and liquid cargos, with a total berth capacity of 18.0m tonnes/pa, at present.

Source: Mplus Research - 25 Oct 2022