This article first appeared in The Edge Malaysia Weekly on December 4, 2023 - December 10, 2023

SABAH-based port operator Suria Capital Holdings Bhd (Suria Cap) is said to be leasing out its Sapangar Bay Container Port to DP World plc for 30 years, sources familiar with the matter tell The Edge.

It is understood that talks have been ongoing for some time now and have reached the tail end and could be concluded soon. Nevertheless, details were scarce at press time and how much DP World will fork out as the lessee is unknown.

“Talk of Suria Cap leasing to DP World and getting it to work on Sapangar Bay Container Port has been making the rounds for a while,” says a source familiar with the matter in Sabah.

In January this year, Suria Cap said in a filing with Bursa Malaysia that the Sabah government had given its approval to Sabah Ports Sdn Bhd, a wholly-owned subsidiary of Suria Cap, to enter into a “strategic collaboration” with DP World. Talk back then was that DP World would buy a stake in Sabah Ports.

Suria Cap, via wholly-owned Sabah Ports, has the state’s major ports and oil terminals under its belt. Sabah Ports operates eight terminals — Sapangar Bay Container Port, Sapangar Bay Oil Terminal, Kota Kinabalu Port, Kudat Port, Sandakan Port, Tawau Port, Lahad Datu Port as well as Kunak Port.

It is noteworthy that Sapangar Bay Container Port has taken over container operations from Kota Kinabalu Port and is undergoing a large-scale expansion that is set to be completed in 2025.

The expansion being undertaken at a cost of about RM1 billion includes doubling the number of quay cranes to eight; increasing the draft of the waterway to 15m from 12m currently, which will enable larger vessels to call at the port; doubling the quay length to 1km; and increasing capacity to 1.25 million 20-foot equivalent units (TEUs) from the existing 500,000 TEUs.

In an August report on Suria Cap, Malacca Securities says Sapangar Bay Container Port’s business could get a shot in the arm from the relocation of manufacturing plants by multinational outfits leaving China to set up manufacturing hubs in Southeast Asia, brought about by tensions between the US and China.

Suria Cap, which is looking to extend its concession by 30 years to 2064 from 2034, aims to promote Sapangar Bay Container Port as a key transshipment hub for the Brunei-Indonesia-Malaysia-Philippines East Asean region. Having DP World as the operator would help achieve its aspiration.

A check on SSM’s website reveals that Sabah Ports, as at end-2022 made an after-tax profit of RM43.26 million on RM268.27 million in revenue.

In FY2021, it posted an after-tax profit of RM43.6 million on a turnover of RM250.17 million. As at end-2022, Sabah Ports had total assets of RM1.02 billion and total liabilities of RM237.99 million.

Other than the eight ports, Suria Cap has some exposure in property development and other businesses.

For its nine months ended September this year, Suria Cap registered a net profit of RM36.96 million on revenue of RM214.06 million.

As at end-September this year, Suria Cap had cash and bank balances of RM107.76 million while on the other side of the balance sheet, it had long-term debt commitments of RM66.55 million and short-term borrowings of RM2.34 million. It is also worth noting that Suria Cap had retained earnings of RM847.91 million as at end-September.

In the notes accompanying its financials Suria Cap says for the third quarter of FY2022, port operations contributed 94% to the group’s revenue and 73% to the group’s profit before tax while year to date, port operations contributed 89% to the group’s revenue and 73% to PBT.

It is likely that with DP World leasing Sapangar Bay Container Port, Suria Cap’s bottom line will receive a boost.

Since end-June this year, Suria Cap’s stock has gained more than 45% and ended trading at RM1.74 last Friday, which translates into a market capitalisation of RM601.7 million. Suria Cap’s stock hit a multi-year high of RM1.84 on Nov 17.

DP World, a global port terminal operator based in Dubai has a network of ports and terminals with the capacity to handle over 90 million TEUs a year and operates more than 60 ports and terminals across the world. 

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