This article first appeared in The Edge Malaysia Weekly on May 16, 2022 - May 22, 2022
MMC Corp Bhd is eyeing a stake in Suria Capital Holdings Bhd for its exposure to East Malaysia ports, sources tell The Edge. They say the move stems from the group’s desire to have exposure to these ports prior to the flotation of its unit, MMC Port Holdings Sdn Bhd, on Bursa Malaysia.
Suria Capital wholly owns Sabah Ports Sdn Bhd, which controls eight ports in Sabah — Tawau Port, Kudat Port, Kota Kinabalu Port, Kunak Port, Sandakan Port, Lahad Datu Port, Sapangar Bay Oil Terminal and Sapangar Bay Container Port.
“Some years back, MMC tried to buy into Sabah Ports directly but the talks fell through as the Sabah government was not keen. In the case of Suria Capital, the group can just buy shares on the open market or a stake from existing shareholders,” says a source.
Suria Capital also has a property development business and construction and ferry terminal operations, among others. However, a chunk of its earnings is derived from its port operations.
MMC was delisted from the stock exchange on Dec 16 last year. It did not reply to a request for comment and Suria Capital is unlikely to be able to comment, considering that the proposed acquisition by MMC is likely to be at the shareholding level.
In August 2017, in response to an article in The Edge stating that MMC was looking to buy a stake in Sabah Ports, Suria Capital replied to a query from the local bourse saying, “The discussion between MMC and Suria Capital with regards to the proposed acquisition of a stake in Sabah Ports by MMC Port Holdings, a wholly-owned subsidiary of MMC, has taken place. However, the board of directors of Suria Capital has yet to make any firm decision in relation to the same. Suria Capital will make further announcements if there is any material development in relation to the said proposed disposal.”
In April 2018, Suria Capital announced to Bursa that “Suria Capital is no longer pursuing the proposed acquisition of Sabah Ports, a wholly-owned subsidiary of Suria Capital, by MMC Port Holdings, a wholly-owned subsidiary of MMC.”
It is understood that the Sabah government — which controls 50.73% of Suria Capital via Qhazanah Sabah Bhd (45.4%), Yayasan Sabah (3.67%) and Chief Minister, State of Sabah (1.66%) — was opposed to the acquisition by MMC.
It is not clear how much of a stake MMC is eyeing.
Another significant shareholder of Suria Capital is iCapital.Biz Bhd, which owns 3.44% equity interest.
Suria Capital’s share price closed at RM1.10 last Thursday, translating into a market capitalisation of RM380.4 million. Since end-February, the stock has shed more than 14% or 18 sen. However, the trading volume has been razor thin, which means it is unlikely that MMC has been accumulating shares on the open market.
Based on its current market value, a 5% stake in Suria Capital should set MMC back by less than RM20 million.
For the financial year ended December 2021, Suria Capital registered a net profit of RM38.84 million from RM244.78 million in sales. It had cash and bank balances of RM79.89 million. On the other side of the balance sheet, it had long-term debt commitments of RM10.31 million and no short-term borrowings. For FY2021, it had retained earnings of RM773.62 million.
As at last Thursday, Suria Capital had an indicative gross dividend yield of 3.64% and its cash per share amounted to a little more than 23 sen.
In Peninsular Malaysia, MMC has substantial port assets. Among others, MMC Port Holdings wholly owns Johor Port Bhd, Penang Port Sdn Bhd and NCB Holdings Bhd, which owns Northport (M) Bhd in Port Klang. MMC Port Holdings also controls 70% of Pelabuhan Tanjung Pelepas Sdn Bhd and other port-related businesses, including haulier Kontena Nasional Bhd and logistics provider JP Logistics Sdn Bhd.
For the financial year ended December 2020, MMC Port Holdings chalked up an after-tax profit of RM239.98 million from RM2.44 billion in revenue. The company had total assets of RM14.99 billion and total liabilities of RM10.6 billion.
MMC is the flagship of businessman Tan Sri Syed Mokhtar Albukhary. In June last year, Seaport Terminal (Johore) Sdn Bhd — Syed Mokhtar’s private vehicle that owned 51.76%, or 1.58 billion shares, of MMC — offered a selective capital repayment of RM2 per share, or RM2.94 billion, to cancel the 1.47 billion shares, or 48.24%, it did not own in MMC.
The privatisation of MMC is believed to be a prelude to the listing of MMC’s port businesses on Bursa.
Apart from the port business, MMC has stakes in two publicly traded entities — 38.45% of independent power producer Malakoff Corp Bhd and 30.93% of Gas Malaysia Bhd. It has interests in a host of other assets such as Johor-based water treatment company Aliran Ihsan Resources Bhd, Senai Airport Terminal Services Sdn Bhd and MMC Engineering Group Bhd.
It also owns 50% of MMC-Gamuda Joint Venture Sdn Bhd — which played a key role in the construction of the Mass Rapid Transit rail lines, in partnership with construction giant Gamuda Bhd — and 50% of Syarikat Mengurus Air Banjir & Terowong Sdn Bhd, known as the SMART Tunnel, which is a flood mitigation and underground motorway rolled into one, also in partnership with Gamuda.
MMC has been talking about floating its port operations on the local bourse since 2017, but market conditions and the pandemic appear to have scuttled the plans.
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