Suria Capital began FY14 with a set of good numbers, which was within our expectations. All the business segments improved in 1Q on  a  y-o-y basis except  for  the  contract and engineering  segment,  due to  the  lack of  major  projects.  Jesselton  Quay’s  development  is  on  track  and  that would benefit Suria Capital in the long run.  There is no change to  our earnings forecast. We keep its FV at MYR3.50 and maintain BUY.

• Stronger  1Q  results.  Suria  Capital  reported  a  stronger  net  profit  of MYR15m  (+31%  y-o-y)  on  the  back  of  higher  revenue  of  MYR72m(+21% y-o-y). All its business segments reported stronger contributions except for the contract and engineering division. Net margin improved by 1.6 ppts y-o-y due to lower expenditures as well as finance costs.
• Segmental  review.  In  1Q14,  there  was  an  increase  in  containerised cargo  throughput  by  22%  y-o-y  to  95,169  twenty-foot  equivalent  unit (TEU)  from  78,194  TEUs,  mainly  attributed  to  the  increase  in transshipment  containers  received  at  the  ports.   However,  the  total tonnage  decreased  by  0.4%  y-o-y  mainly  because  of  lower  fertiliser, wood products and palm oil throughput. Logistics and bunkering division improved  y-o-y  mainly  due  to  increased  sales  of  fuel  volume  for  the supply of bunkering fuel for cruise ships in  the  Kota Kinabalu Port. This division  also  resumed  the  heavy  lifting  and  shuttling  business  with  the commencement of Sabah Ammonia Urea (SAMUR) project. Revenue for ferry terminal  operation improved as more revenue  was generated from ferry  transportation  and  cruise  ship’s  passenger  fees,  rental  of  retail space  and  operation  of  indoor  soccer  centre.  Contract  &  engineering segment did not do well largely due to the lack of major external projects.
• Jesselton  Quay  update.  The  project  reached  a  key  milestone  on  16May whereby  SBC Corp (SBC MK, NR) signed the loan agreement with RHB  Bank,  and  Suria  Capital  announced  ownership  of  the  land  title. Hence,  the  joint  venture  (JV)  agreement is  now  unconditional.  (Please see Suria Capital - A Witness To Jesselton Quay’s Key Milestone).  
• Maintain  BUY.  We  keep  our  earnings  forecast  unchanged  at  this juncture. We  believe  that  there  is  more  upside  to  the  earnings  as  our assumptions remain  on the conservative side. Maintain BUY  with DCF derived-FV of MYR3.50 unchanged. 

Source: RHB