KEY INVESTMENT HIGHLIGHTS

• 2QFY24 core PATAMI met our estimate
• KKIP's new plants fuel growth in container throughput
• New oil jetty at SBOT appears to have commenced operations
• No changes to earnings estimates
• Maintain SELL with an unchanged TP of RM1.60

Within expectations. In 2QFY24, Suria Capital Holdings Berhad (Suria) reported a core PATAMI of RM14.6m, resulting in a total core PATAMI of RM28.7m for 1HFY24. This result was in line with our forecasts, making up 55%/53% of our/consensus full-year estimates.

Quarterly. The +13.0%yoy increase in operating revenue in 2QFY24 was largely fueled by an +11.9%yoy rise in container throughput, driven by the start of operations at SK Nexilis and Kibing Group's plants in 4QFY23. The rise in conventional throughput (+14.3%qoq, +7.7%yoy) likely reflects increased bulk oil volume, possibly due to the new oil jetty at Sapangar Bay Oil Terminal (SBOT) beginning operations as anticipated during the reporting quarter. Core PATAMI saw a nearly fivefold increase due to adjustments in the amortisation of concession assets according to the initial concession period. Sequentially, core PATAMI (+2.1%qoq) saw a modest rise, primarily driven by the growth in the conventional business.

Outlook. We anticipate an improved performance this year, mainly due to the full-year impact of the new foreign direct investments (FDIs) established at Kota Kinabalu Industrial Park (KKIP), which are expected to add around 38,400 TEUs annually to Suria's operations. We also expect the new oil jetty at SBOT to provide additional support for steady growth in conventional cargo volume. Our forecasts show a +7.0%yoy rise in container throughput and a +3.0%yoy increase in conventional throughput for this year. Notably, through 1HFY24, container and conventional throughput have achieved 50% and 48% of our full-year projections, respectively.

Maintain SELL. Our earnings forecasts and RM1.60 target price (WACC: 9%, g: 1%), remain unchanged. We maintain a SELL rating due to valuation, as it trades at 12.2x FY25F or +1.0 SD above its 5-year historical average. We see the potential for further gains if there is a definitive decision on the long-anticipated tariff revision and more clarity on the strategic partnership between Suria and DP World for developing the flagship Sapangar Bay Container Port.

Source: MIDF Research - 2 Sep 2024