Suria  Capital  9M13  core  net  earnings  beat  our  and  street  estimates, thanks  largely  to  lower  operating  expenses,  which  in  turn  bolstered margins.  We adjust  our earnings forecast and DCF valuation to better reflect  the  company’s  actual  cash  flow.  Suria  has  declared  an  interim dividend of 3.0 sen for the quarter under review. We remain positive on the stock. Maintain BUY and FV of MYR3.50.

• Beat  expectations.  Suria’s  9M13  core  net  earnings  of  MYR46.1m (+4.5%  y-o-y)  were  stronger  than  our  and  consensus’  expectations. 9M13  earnings  reached  84%  of  our  previous  2013  estimate,  as expenses  at  its  ports operation  declined  3%  y-o-y,  mainly  attributed  to lower  repair  and  maintenance  costs.  During  9M13,  the  group’s  total cargo  throughput  ticked  up  2%  y-o-y  on  the  back  of  higher  exports  of palm oil, while container volume dipped 2% y-o-y.
• Adjusting  earnings  and  valuation.  Following  the  stronger-thanexpected  earnings,  we  lift  our  earnings  forecasts by  15%  and  16% for 2013-14  respectively.  We  also  lift  our  DCF  valuation  parameters  after attending  a  meeting  with  Suria’s  Chief  Financial  Officer  Ng  Kiat  Min(refer to page 4).
• Risks. A slowdown in the economy is the main risk.
• Maintain BUY, FV MYR3.50.  We are  still  upbeat on  Suria’s  outlook as the  potential  growth  from  the  development  of  the  Jesselton  Quay remains  positive.  All  in,  we  continue  to  believe  that  Suria  is  a  counter that  possesses  strong  fundamentals  with  limited  downside  risk  and strong growth potential. Hence,  we maintain  our BUY recommendation and FV  of MYR3.50,  after  tweaking  our DCF valuation  (please refer to Figure 3).  This  translates  into an implied forward P/E of 15.3x, which is lower than the industry average of 16.6x. 

Financial Exhibits

SWOT Analysis

Company Profile
Suria Capital (Suria)’s  main core business is operating the eight major ports in Sabah, namely  Kota Kinabalu Port, Sapangar Bay Oil Terminal, Sandakan Port, Lahad Datu Port, Kunak Port, Kudat Port, Tawau Port  and Sapangar Bay Container Port. The  group also operates other businesses,  such as  equipment  supply  and  maintenance,  logistics and  bunkering  services,  contract  and engineering, and ferry terminal operations. Suria is looking for opportunities to diversify its operations into the property and tourism sectors.

Recommendation Chart

Source: RHB