Suria Capital Holdings Bhd

DESPITE its high CAPEX requirement and sensitivity to economic cycles, Suria (fundamental: 2.3/3; valuation: 1.8/3) generates steady cash flows. A key catalyst going forward would be the long-awaited Jesselton Quay project. 

After selling its financial services business in 2003, Suria secured a 30-year port concession to manage major ports in Sabah the following year. Predominantly an Import/Export port operator, Suria’s cargo volume is closely correlated to Sabah’s economy and, in particular, palm oil exports. 

While revenue fluctuated within a 10% band over past five years, Suria managed to maintain gross margin at over 40%. Revenue for 2014 rose 4.2% y-y on the back of 7% increase in container volume, although earnings dipped 3.9% due to higher operating costs. 

In 2013, the company signed a JV agreement with SBC Corp Bhd (SBC) to develop the Jesselton Quay project — a waterfront mixed development project worth RM1.8 billion — in Kota Kinabalu. In return for its land, Suria would receive a minimum guaranteed RM324 million from SBC over the 8-year development period. Approval for the project is expected by mid-2015.

The port operator is majority-owned by the Sabah state government (51.6%) while institutional investors collectively hold another 19.2%. 

Suria has a strong balance sheet with net cash of RM75.0 million, or 26.5 sen per share. Net margin and ROE for 2014 stood at 20.2% and 6.8%, respectively. 

Suria currently trades at below-average valuations, trailing P/E of 11.8 times and 0.8 times book. In comparison, Bintulu Port, Westports and Integrax all trade at trailing P/E of above 20 times. 

Suria has a minimum 35% dividend payout policy. An interim dividend of 3 sen per share for 2014 was paid in December. Total dividends ranged from 6 to 7 sen per share from 2011 to 2013, translating into a yield of 2.6% to 3.0%.

This article first appeared in The Edge Financial Daily, on March 16, 2015.