MIDF: Development of free zone can attract more MNCs

KUALA LUMPUR: MMC Corp Bhd’s Port of Tanjung Pelepas (PTP) has an advantage over the Port of Singapore in terms of land availability, enabling a wider free zone to be set up.

MIDF Research said the development of the free zone could attract more multinational corporations (MNCs) to shift their warehouse operations to PTP and, eventually, this would also include container volume.

It said of the 1,416ha covering PTP, around 405ha had been allocated for the free zone.

“The tenure of the lease agreement with companies setting up warehouses usually lasts for 30 years with an agreement to commit to a certain level of container throughput,” said MIDF Research in a note.

The latest occupants included the Volkswagen AG regional parts centre that commenced operations in October last year, it added.

MIDF Research said PTP was in the final stages of getting the approval to expand Phase 3 of the free zone measuring 68ha.

MIDF Research said PTP offered competitive tariffs for transshipment cargo.

“The published transshipment tariffs are slightly higher than that of Port Klang but are around 40 per cent cheaper than Port of Singapore,” it said.

As such, the transshipment tariffs imposed by PTP struck a balance between price and efficiency, it added.

MIDF Research said MMC’s Johor Port Bhd (JPB) was working closely with the authorities for the 30 per cent tariff hike at Johor Port.

“The tariffs were last revised in 2011. Any revision in tariffs could potentially shore up earnings for JPB,” it said.

JPB would also begin the operations of a solid product jetty in Pengerang under a 25-year port operatorship agreement by the middle of this year, with an annual capacity of 130,000 twenty-foot equivalent units, said MIDF Research.

The research firm adjusted MMC’s earnings forecasts slightly upwards for financial years 2019 and 2020 by less than one per cent to RM235.2 million and RM257.4 million, respectively, with a higher target price of RM1.39 from RM1.37 previously.

This was after taking into account of the higher expected volume at JPB following the commencement of the solid product jetty and other housekeeping adjustments, it added.