Analyst: Stage set for Suria Capital’s long-term growth
KUCHING: Suria Capital HOldings Bhd (Suria Capital) is set to see a rise in its growth going forward as it expects a better lease/tariff term clause for Sabah Ports on the back of its vertical port large-capacity expansion.
To note, Sapangar Bay Container Port (SBCP) handled 285,619 TEUs or about 71.9 per cent of the total container cargo throughput in financial year 2021 (FY21).
The company highlighted that the vertical port masterplan of SBCP will convert current quay cranes from four units (single) to six units (twin) with significant increase in capacity from 500,000 TEUs to 1.25 million TEUs capitalising on high efficiency vertical port handling movement inspired by South Korea Port.
“Although the expansion project is being funded by the federal government with an allocation of RM1 billion, Suria Capital has committed up to RM2 billion in capital expenditure with expected completion in February 2025,” Kenanga Investment Bank Bhd (Kenanga Research) said in a note yesterday.
“The company noted that the costs of living in Sabah are quite high due to trade imbalance, and with this expansion, it could move its status higher as a transhipment hub with a direct line by the main line operators (MLOs).
“The development of the new Indonesia capital city, Nusantara could as well be the additional catalyst needed to fill up the volume gap.”
On that note, Kenanga Research expects a better lease/ tariff term clause for Sabah Ports. The same story as Bintulu Ports goes for Sabah Ports as they are currently in discussion with the federal government and looking for a better lease term and port tariff structure, at least comparable to the industry rate.
To note, there has been no revision since the conception of the concession agreement on 1977 (concession period of 30 years until 2034). To compare, Sabah Ports currently are charging RM200 per TEU versus Bintulu Port’s RM207.50 per TEU, both with zero lease/tariff revision clause.
“We believe a revision would be a boon to the company in the longer run and could be a significant boost to its expansion plan to 1.25 million TEUs,” it added.
In other updates, Suria Capital had entered into a joint venture agreement (JVA) with SBC Corporations Bhd (SBC) in 2013 to jointly develop Jesselton Quay.
Suria Capital’s part of the JVA is only related to land entitlement cost and Suria Capital is only eligible to recognised 18 per cent of revenue sharing from the total of RM1.8 billion which amounted to RM324 million.
Since 2015, it faced several delays especially during the lockdown and has only recently completed the first phase with only seven units left from the 25-storey two-tower commercial suites called CityPads.
Suria Capital mentioned that it had already recognised the first tranche payment of RM116 million since 2015 as profit.
Future development of Phase 2 and 3 would depend on market and viability of financing from banks especially with the soaring steel prices.
“Suria Capital highlighted that it most probably will start Phase 2 starting with Jesselton Quay front as this is where the crowd is gathering. We view this as a long-term plan and further profit recognition could be staggered for the next five years.”
Currently, Suria Capital has embarked on a plan to relocate the general cargo operations at the current Kota Kinabalu Port to Sapangar Bay to facilitate the development of a dedicated international cruise terminal adjacent to the Jesselton Quay development area.
The company mentioned that this would make for more appropriate scenery as they visualised Jesselton Quay as a commercial hub while the home cruise terminal would raise the commercial value of the area.