GEORGE TOWN: After more than a decade of being on the market, Penang Port Sdn Bhd (PPSB), operator of the oldest port in the country, may have finally found a buyer for its loss-making ferry operations linking Penang Island to Butterworth. Prasarana Malaysia Bhd is buying the iconic ferry service, sources said.
However, it is not known how much the public transport service operator will pay for the operations.
According to sources close to the situation, the disposal is expected to synchronise with the completion of a RM200 million stake sale of PPSB to MMC Corp Bhd in the first quarter of 2017 (1Q17).
In August this year, MMC announced that it was acquiring 35.99 million shares or a 49% stake in PPSB from Seaport Terminal (Johore) Sdn Bhd for RM200 million cash, but with the assumption that the ferry business will not be part of the deal.
A source familiar with the matter told The Edge Financial Daily that both MMC and Prasarana are still considering whether to enter into a joint venture or an outright sale of the ferry business to Prasarana.
“Prasarana is in talks with its parent Minister of Finance Inc (MoF inc) on the takeover, but it is unknown to what degree they are in. The plans keep changing.
“But on the port operations, it is likely that MMC will eventually make a full takeover of Penang Port, similar to the takeover of Northport’s owner NCB Holdings Bhd for RM1.1 billion earlier this year. The port needs to be run professionally by port entities like MMC, which wants to leverage customers from other ports,” the source said.
PPSB and Prasarana declined to comment when contacted by The Edge Financial Daily.
It is understood that Prasarana is a little hesitant about taking over the ferry operations as it is entering unfamiliar territory and that the latter is loss-making.
This is not the first time news emerged that Prasarana was taking over the Penang ferry operations from PPSB. In July 2009, Prasarana, then known as Syarikat Prasarana Negara Bhd, was already identified as interested to take over the ferry service.
Under its previous owner — MoF Inc — PPSB had planned to hive off its ferry operations as early as 2004, as the service had been dragging down the company’s overall profits since day one.
The loss-making ferry service had also been a stumbling block to PPSB’s initial public offering. However, doing away with the iconic ferry service is definitely a no-no since it is regarded as one of Penang’s most famous heritage entities. In 1994, PPSB signed a 30-year concession agreement with the Penang Port Commission to operate the ferry service and Penang Port.
A check with the Companies Commission of Malaysia revealed that PPSB returned to the black with a net profit of RM2.22 million for the financial year ended Dec 31, 2015 (FY15), compared to a net loss of RM569,501 for the previous year. This was on the back of higher revenue, which rose 13% to RM399.48 million in FY15 from RM353.1 million in FY14.
In January 2014, Seaport Terminal (Johore) — controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary via his private investment vehicle Indra Cita Sdn Bhd — assumed ownership of PPSB from MoF Inc after edging out four other companies to privatise the port in a restricted tender process. MoF Inc still holds one golden share in PPSB.
Under the deal, Seaport Terminal (Johore) was to undertake PPSB’s social obligations, which include providing the ferry service, settling the port’s debts of over RM1.2 billion, paying for the capital dredging cost (dredging of the seabed from 11.5m to 14.5m) and providing capital injection to develop the area surrounding the port.
According to a source close to PPSB, Seaport Terminal (Johore) had undertaken a review of PPSB’s procurement contracts, enhanced its processes and restructured its staff force. “Those were low-lying fruits that they could capitalise on. Following this, PPSB is expected to undertake a five-year restructuring plan beginning 2017.”
The plan, which coincides with MMC’s entry by March next year, would ensure the continuation of a 7% year-on-year growth of its container handling segment, while the cruise segment is expected to grow by up to 20% from 3Q17.
“The container handling segment currently contributes 75% of PPSB’s revenue, while 18% to 20% comes from the general cargo segment. The cruise segment makes up another 8%,” the source added.
Last year, Penang Port handled 1.37 million TEUs (20-foot equivalent units) of containers, and it is on track to meet its target of 1.4 million TEUs for 2016, having recorded 1.1 million TEUs so far this year. The port has an annual capacity of two million TEUs.
About 30% of its container volume throughput comes from southern Thailand, while the rest comes from indigenous cargo. It serves major shipping lines, such as Wan Hai Lines Ltd, Evergreen Marine Corp (Taiwan) Ltd, Yang Ming Marine Transport Corp, French CMA CGM SA and Denmark-based Maersk Line.
However, Penang Port aims to spread its risk instead of focusing on the container segment. Hence, it plans to expand the cruise segment, which is more suitable in Penang, and reintroduce the tuna port business this month.
“It has not been capitalised well. In 3Q17, the company will pump in more money and resolve land matters [to expand facilities]. It wants to diversify to remove the dependency on one segment,” said the source.
Currently, Penang is the port of call for Genting Hong Kong Ltd’s Star Cruises, Royal Caribbean International’s cruise liners, as well as Carnival Corp & plc’s Costa Cruises and Princess Cruises.
“PPSB is working with the state government and tourism players to ensure a smooth experience for tourists as they exit the port,” the source added.
MMC shares closed 11 sen or 4.56% lower at RM2.30 last Friday, bringing a market capitalisation of RM7.19 billion.