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To recap, Suria entered into a conditional share subscription agreement with DP World. We view the collaboration positively as its wholly-owned Sabah Ports stands to gain from DP World’s global expertise and supply chain network. The agreement is anticipated to be completed in 3QFY24, subject to the fulfilment of terms and conditions.
The key catalyst for Suria would be higher port tariffs — unchanged since 1977. The Sabah state cabinet approved the review of tariff rates in 2020, with implemen
You may think that being a privatized port operator for the whole of Sabah would make Suria Capital a company with good returns. Unfortunately over the past 12 years, the company only achieved an average ROE of 6%. https://i.postimg.cc/4NqfFSsN/Suria-Cap-returns.png
In fact quite a substantial part of its profits came from non-port operations such as property and investments.
I think this is because the economic activities in Sabah is not as developed as those in Peninsular Malaysia. While it is a growing economy and it may some time before we see Suria Capital benefiting from this.
The tariff will be announced together with the announcement of cantractual matters with DP World. Leasing rate, tariff rate will be related and will definately a boost to Suria profit margin. Spangar Bay container port contributed about 75% (or 325K Teu) of the containers handling by Suria and expected to increase 93K TEU this year due to foreign investments at KKIP.
Previously, mostly of the containers shipped to to Sabah with loaded and returned off with empty containers. With the foreign investments in Sabah, export of good will increase and the empty containers will be filled. Definitely will benefit Suria in revenue and profit.