This article first appeared in The Edge Malaysia Weekly on September 7, 2020 - September 13, 2020

PORT operators Westports Holdings Bhd and Northport (M) Bhd are said to be considering a joint bid to buy Boustead Cruise Centre Sdn Bhd from Boustead Holdings Bhd, people familiar with the matter tell The Edge.

It is understood that the operators of the two ports that make up Port Klang have already expressed their interest to Boustead, but it is unclear whether an official offer has been made.

“It is great that they [Westports and Northport] are working together,” says one of the people familiar with the matter. Meanwhile, another person says, “It is about time they worked together instead of competing.”

Details of Boustead’s open tender were not available and the people in charge could not be contacted for comment.

It would be interesting to see what Boustead’s asking price is for Boustead Cruise Centre, which comprises the Port Klang Cruise Centre terminal and land. To recap, Boustead acquired 69.88 acres of land, including the terminal in Pulau Indah, Port Klang, for a total of RM310 million in 2014, as it sought to expand its oil and gas business.

The initial plans were for Boustead to come up with an additional investment of RM100 million to develop the land as well, but it is unclear whether the investment was undertaken, as Brent Crude prices, which averaged US$110 per barrel between January 2011 and June 2014, started to taper off and hit a low of US$29 per barrel in January 2016.

Boustead had financed the acquisition via RM200 million of debt paper, or junior sukuk, bank borrowings and its cash holdings. Its unit Bestari Marine Sdn Bhd, which later morphed into Boustead Cruise Centre, acquired the assets from Glenn Defense Marine (Asia) Sdn Bhd and its controlling shareholder Glenn Leonard Francis, who ran into trouble on an international scale.

The Port Klang Cruise Centre was built on an 11.82-acre parcel and comprised a five-storey cruise terminal building and jetty back then, but it is unclear whether any changes have been made over the years by Boustead.

In 2014, Glenn Marine Group (Asia), which was linked to the cruise terminal, put in a proposal to build a third container terminal in Port Klang at a cost of RM1.5 billion, but it did not take off. The cruise terminal as a third port was mooted in 2010, when the Port Klang Authority commissioned consultancy firms GHK (Hong Kong) Ltd and Orion Marine to create the Port Klang Development Master Plan 2010-2030.

This plan to convert the cruise terminal and its surrounding land into a container port fell through, however, given the large-scale expansion of Westports to the tune of RM10 billion. Northport’s parent MMC Corp Bhd’s goals for Carey Island, which will exceed RM100 million, are still opaque, as the company is still in the planning stage.

A check on its filings with the Companies Commission of Malaysia indicates that, from 2013 to 2018, Boustead Cruise Centre managed to chart only one year of profit — in 2014. For its financial year ended December 2018, the cruise terminal suffered an after-tax loss of RM3.77 million from RM27.45 million in sales. The operator had racked up RM30.42 million in accumulated losses as at end-2018. At the time, Boustead Cruise Centre had total assets of RM315.55 million and total liabilities of RM265.97 million.

Westports, which controls the lion’s share of container traffic in Port Klang, registered a net profit of RM287.15 million from RM905.07 million in revenue for the six months ended June 2020. It had cash and short-term investments of RM751.9 million as well as long-term debt commitments of RM1.2 billion and short-term borrowings of RM200 million. Its net cash stood at RM445.8 million.

To put things into perspective, Westports had cash reserves of almost RM1.6 billion as at end-June. The company is 42.42% controlled by Pembinaan Redzai Sdn Bhd, the private vehicle of Tan Sri G Gnanalingam and his family. His son Datuk Ruben Emir Gnanalingam is managing director of Westports. The stock closed at RM3.97 last Thursday, giving Westports a market capitalisation of RM13.54 billion.

Diversified conglomerate MMC Corp owns several ports, including the Port of Tanjung Pelepas, Penang Port and Johor Port. There had been talk of a flotation exercise for its port assets, which could be a significant initial public offering, but market conditions and economic uncertainties have put these plans on hold. MMC Corp also has interests in power generation, engineering, construction and airports, among other businesses.

For the six months ended June, MMC Corp posted a net profit of RM135.24 million on the back of RM2.08 billion in turnover. It had deposits as well as bank and cash balances of RM1.7 billion on top of investments of RM1.47 billion.

On the other side of the balance sheet, MMC Corp had long-term debt commitments of RM7.56 billion and short-term borrowings of RM3.05 billion. Its finance costs stood at RM345.52 million.

Nevertheless, it still had cash reserves of almost RM7 billion. Its net cash from operations stood at RM816.59 million for the six months ended June.

Businessman Tan Sri Syed Mokhtar Albukhary controls 51.76% of MMC Corp via his private vehicle Seaport Terminal (Johore) Sdn Bhd. The counter closed at 74 sen last Thursday, giving the company a market valuation of RM2.27 billion.

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