Initiate coverage with STRONG BUY

In view of attractive overall return of 43.4%, we initiate coverage on Suria with a high conviction STRONG BUY recommendation.
Going forward, we foresee further upside potential to our target price which could be catalysed by;
1) unveiling of the development plan for the remaining 7 acres of land at KK port;
2) port tariff adjustment which is now pending the review and approval of the Sabah state government; and
3) stronger than expected contribution from its logistic and bunkering division following the collaboration with Petro Summit.

For FY15, earnings growth likely to be lower due to operating lease hike and higher depreciation.

Solid cash flow and decent dividend

While earnings growth seems unexciting at mid-single digit, we see attractive and strong cash flow generation for the remaining port concession period. Over the past 4 years, Suria achieved an average net operating cash flow of RM126m p.a., even though it has only recorded an average annual core net profit of RM55m over the same period.

This was mainly due to the claims for investment tax allowance at the rate of 100% on capex incurred between 1 Sept 2004 and 31 Aug 2009. As at FY12, there was still RM276m unutilised investment allowance and capital allowance. This is more than enough to offset the income tax payable by the group up to FY15, based on our estimate.

As such, we anticipate the group continues to generate strong operating cash flow of RM117m and RM122m in FY14 and FY15 respectively. For FY13, operating cash flow is projected to come lower at RM46m as the group sets to pay the remaining land premium of RM71m. From 2016 to 2034 (the remaining concession period), Suria is expected to generate operating cash flow of RM106-160m p.a..

Currently, Suria has a formal dividend policy of 35% payout ratio. This implies a dividend yield of 2.8% and 3.0% for FY14 and FY15. With anticipation of strong free cash flow post FY15, we believe Suria could raise its dividend payout ratio in FY16. Assuming 100% payout ratio thereafter, dividend yield could hit 9% in FY16.

Palm oil output drop in Sabah
Given that Suria’s port earnings are highly sensitive to palm oil exports from Sabah, any surprise contraction in palm oil output in Sabah would be a major risk to our cash flow projection. Factors that could affect palm oil output include (1) bad weather, (2) tree stress, and (3) labour shortage in the palm oil industry. Having said that, we believe our assumption of 1.5% y-o-y growth for palm oil export is reasonable and achievable, as we believe replanting activities have eased in Sabah.

Over the long term, we project 5% and 1.5% throughputs growth p.a. for container and overall cargo.

we believe the growth rate to be better at mid-single digit (5-7% p.a.), mainly driven by
(1) better cost efficiency as the port operating efficiencies improve due to facilities upgrade and higher utilisation rate,
(2) declining depreciation charge starting from FY17 as major capex incurred in FY14 and FY15, (3) declining financing cost as borrowings decline in line with debt repayment schedule which will be fully repaid by 2019.

the development of oil & gas industry in Sabah will provide long term growth to Suria.

we believe the development of oil and gas industry in Sabah will serve as a long term driver for Suria, once more investments flow from the upstream to downstream such as petrochemical plants, which could attract more investment in the manufacturing industry that could drive the port throughputs as export activities increase. For example, Suria benefits from the commencement of Sabah Ammonia Urea Project since mid of 2013, as the group has been reappointed for the heavy lifting and shuttling of heavy and oversize cargoes within KK port, as well as at the project site in Sipitang.

Anticipate stronger state GDP growth going forward, as we see stronger commitment from the federal government.

Going forward,
we foresee Sabah state GDP to grow stronger than the past 3 years as we see stronger commitment from the federal government to improve the state amenities and welfare post 13GE. Among the initiatives unveiled in Budget 2014, we believe that :

(1) lobster rearing project with multinational company at Semporna,
(2) upgrading works at Kota Kinabalu Airport and Sandakan Airport, and
(3) continuous budget allocation for the development of agropolitan project and oil palm-based industries in the Sabah Development Corridor, to have a significant multiplier impact to the state GDP growth, and hence, Suria’s port operation.

Tie-up with Petro Summit likely to boost the division revenue and eliminate the business risk for Suria.

Port tariff adjustments on the cards
Another earnings driver which has not been factored in in our FCFE valuation model is port tariff adjustment. According to management, a proposal on a new tariff structure has been submitted to the Sabah State Government for review and approval. If the state government adopts all the proposals under the new tariff structure, Suria’s port revenue could see a 30% boost overnight. While management opines that the Sabah State Government is not likely to approve and adopt all the proposals stated under the new tariff structure, it will be a bonus to Suria even if a lower tariff hike is approved.

Sabah’s economic growth is mainly driven by tourism, palm oil and oil & gas industry.

As the largest palm oil producing state in Malaysia, Sabah Ports appear to be the direct beneficiary to the industry growth.

Eco-tourism industry also plays a significant role in Sabah GDP growth.
1. Apart from palm oil industry, Sabah eco-tourism industry plays a significant role in state GDP growth. Over the past 4 years, tourist arrivals in Sabah have grown at a CAGR of 5.7%, bringing direct foreign fund inflows of RM22.2bn to the state. This is higher than the nation’s historical 4-year CAGR of 3.2%.

2. We believe the Land Below The Wind, which is blessed with natural beauties such as crystal blue water & white sandy beaches, rich rainforests, and the breath-taking Mount Kota Kinabalu, will continue to be one of the most attractive tourist hot spots in the region. Going forward, we anticipate the eco-tourism industry to remain robust with particular strong years in 2014 and 2015, which have been designated as Visit Malaysia Year and Year of Festival respectively. During the first seven months of 2013, tourist arrivals in Sabah have grown by 13.5% y-o-y. Suria as the exclusive port operator in Sabah, will indirectly benefit from rising domestic consumptions.

As an EPP identified by federal government, Jesselton Quay is adjacent to other catalytic projects.

As one of the entry point projects (EPPs) identified by the federal government, Jesselton Quay is adjacent to other catalytic projects such as Sabah International Convention Centre, KK International Cruise Terminal (operated by Suria), and Mah Sing-Yayasan Sabah’s Kota Kinabalu Convention City. Hence, we see great chance of success for Jesselton Quay with potential GDV upgrade in future. Based on the total net floor area (NFA) of 1.84m square feet for the entire project, the average selling price is approximately RM1,000 psf.

Risk is low for Suria, given that 65% of the JV consideration is practically secured.

Further upside from development of remaining landbank at KK port.

we like Suria’s limited earnings risk and believe its earnings are at inflection point in FY13 as we foresee,
(1) logistic and bunkering services to turnaround from FY14 onwards,
(2) potential port tariff adjustments which could result in an overall 30% increase in port revenue if all the proposed tariffs are accepted and approved by the Sabah state government, and
(3) no more earnings drag from contract & engineering division as the group has almost completed (98%) its major project, Kimanis Power Plant as at Oct 2013. Going forward, we anticipate the contract & engineering division to have neutral impact to the group.

Container is the largest revenue stream but liquid & dry cargos are the main earnings contributor.

We like Suria on 3 investment angles, i.e.
(1) deep discount to its intrinsic value which is underpinned by its port operations with stable cash flow generation and JV consideration from the development of Jesselton Quay,
(2) further upside from development of remaining landbank at KK port, and
(3) limited earnings risk as earnings trend is currently at inflection point with multiple positive catalysts on the horizon.

Deep discount to its intrinsic value which is underpinned by its stable and predictable cash flow.

FCFE-based valuation of RM956.4m implies 41% upside from its existing market cap.

Market has yet to fully price in the potential of its property division.

SBC is responsible for all the costs and matters relating to the 16.25-acre waterfront development named Jesselton Quay, which consists of commercial suites, retail mall, hotel, and office towers. The said project will be developed over 8 years from 2014 to 2021. On the other hand, Suria as the landowner shall assist and facilitate in the implementation of the project. Suria will receive a minimum return of 18% of the total GDV, subject to a minimum guaranteed amount of RM324m which will be received progressively over the next 8 years.

Jesselton Quay rising to be an iconic waterfront project in KK, Sabah.

HJey, I really really regret why I din not buy Hapseng, go to buy other.

Juz buy in. Bright future in 2014.

May buy in from now b4 price reach at rm4.50.

That why my remisier wanna me to keep & hold until now.
Price will rebound next.

Unbelieveable, I like u Kossan.

It sure will fly, patient. & wait.
This counter sure going to fly.
( I also imformed by my remisier, PJ since on Nov 2013.)

The Price will exceed rm3.00 is a matter of time.

Any points i miss it?

1. campany got 6 sections business.
2. paid high dividend.
3. Net profit exceed rm100,000.000

what WTK? I din put money in this counter la.

He added; this counter totally undervalue stocks.

My PJ's remisier told me to hold in 2014.

財經

30 Dec 2013 17:39
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　（吉隆坡30日訊）亞太飛行訓練（APFT，5194，主要板貿易）將以3060萬令吉收購油氣資產，多元化業務至油氣與化學業，預計可助明年轉虧為盈。

　亞太飛行訓練執行主席拿督法陸說：“今日在特別股東大會上獲股東通過，以3060萬令吉現金和股票收購印尼油氣公司PT Technic的51%股權，預計明年1月完成后油氣業務將成為公司另一項核心業務。”

　他指出，該公司看好油氣市場，尚有合約規模達200億令吉，若可從中獲得一些合約，預計獲益不少。

　“預計收購油氣業務后，公司可在明年轉盈，因為該業務帶來600萬令吉盈利擔保，加上PT Technic已握有一些合約，料可大大改善公司整體業績表現。”

　他指出，PT Technic為在大馬經營的印尼油氣公司，目前主要獲得的合約都在大馬。

Enter in 2014, Dsonic will much better compare in 2013.

No, I changed my mind to buy others.
Feel little regret.
Do u have any recommen regarding which counter worth to invest, btchoopg?
thx!

INSAS Will have another price rebound rm1.00 above in 2014.

Suria Capital (Suria)’s main core business is operating the eight major ports in Sabah, namely
A. Kota Kinabalu Port,
B. Sapangar Bay Oil Terminal,
C. Sandakan Port,
D. Lahad Datu Port,
E.Kunak Port,
F. Kudat Port,
G. Tawau Port and
H. Sapangar Bay Container Port.

The group also
operates other businesses, such as equipment supply and maintenance,
logistics and bunkering services,
contract and engineering,
and ferry terminal operations.

Suria is looking for opportunities to diversify its operations into the property and tourism sectors.
Around 15% shares in SURIA holding by Unit Trusts Funds.

1. Beat expectations.
1.1 Suria’s 9M13 core net earnings of MYR46.1m
(+4.5% y-o-y) were stronger than our and consensus’ expectations.
9M13 earnings reached 84% of our previous 2013 estimate, as
expenses at its ports operation declined 3% y-o-y, mainly attributed to
lower repair and maintenance costs.
1.2 During 9M13, the group’s total
cargo throughput ticked up 2% y-o-y on the back of higher exports of
palm oil, while container volume dipped 2% y-o-y.

2. Adjusting earnings and valuation.
2.1 Following the stronger-thanexpected
earnings, we lift our earnings forecasts by 15% and 16% for
2013-14 respectively.
2.2 We also lift our DCF valuation parameters after
attending a meeting with Suria’s Chief Financial Officer Ng Kiat Min.

3.Maintain BUY, FV MYR3.50.
3.1 We are still upbeat on Suria’s outlook as
the potential growth from the development of the Jesselton Quay
remains positive.
3.2 All in, we continue to believe that Suria is a counter
that possesses strong fundamentals with limited downside risk and
strong growth potential.
3.3 Hence, we maintain our BUY recommendation
and FV of MYR3.50, after tweaking our DCF valuation.
This translates into an implied forward P/E of 15.3x, which is
lower than the industry average of 16.6x.

BRIGHT FUTURE SOLID GROWTH IN 2014.

No wonder when I buy in & my remisier told me
Kossan is a good campany and he adviced me
to keep long term.
The longer time u hold, the bigger profit u earn.
He added: Appriciate it.

pls dun compare dsonic's price now with b4 share split.
Thx.

Business News

Home > Business > Business News

Published: Monday December 30, 2013 MYT 12:17:00 PM
Updated: Monday December 30, 2013 MYT 12:54:48 PM
APFT to boost revenue through O&G acquisition, aviation biz overseas

by intan farhana zainul


PETALING JAYA: Aviation training provider APFT Bhd is aiming to turn around its fortunes by financial year 2014 (FY14) by venturing into the oil and gas industry as well as expand its civil aviation training expertise to Indonesia and India.

“We are targeting to complete the acquisition deal of O&G company, PT Technip Sdn Bhd by next month,” said chairman Datuk Faruk Othman to reporters after the company’s EGM on Monday.

APFT shareholders gave the green light at the EGM for the company to proceed with its plan to acquire 51% in PT Technic for RM30.6mil, of which RM10mil would be in cash and the rest via issuance of new APFT shares.

StarBiz had previously reported that the company was proposing to acquire PT Technic as part of its plan to diversify its earnings base by venturing into the O&G industry.

“Once the acquisition is completed, we would be able to clock in RM3mil guaranteed profit from PT Technic in our FY13, which ends March 31,” Faruk said.

“Going forward, (we foresee) 50% of APFT earnings will be contributed from our O&G arm, with the rest from our core business,” he added.

Currently, the company’s core business is to provide training, education and services in the civil aviation field. It is the only authorised flight training organisation licensed by the Department of Civil Aviation Malaysia to conduct training for helicopter pilots nationally.

Faruk said APFT’s core business had also shown brighter prospects as the demand for pilots was increasing.

“Both our licence to run training school in India and Indonesia have been approved, and currently we have 12 students in India, while for Indonesia, we are aiming to start the school by March next year,” he added.

In the meantime, the first nine months to Sept 30 saw APFT’s net loss widening to RM11.4mil from a net loss of RM3.08mil in the same period a year ago. Revenue in the same period fell to RM14mil from RM16.9mil a year ago.

( juz share to all )
thanks.

samshing, r u sure up to at rm6.00?
But i hope so.
even at rm5.00 i also satisfies.
Buy back, I think is no problem.

Hope the price will close rm4.20 today.

I think next rebound will be in early 2014.

others good stock in 2014
I think is Oil & Gas campany like Alam, Dayang,, Skpetro, Tenaga, AirAsia.
( dunno included Mas or not - Mas bahaya to invest for me.)

I will buy in 10 lots HapSeng share next Monday.
As u said, hope to reach exceed rm3.20 beginning of 2014.

YES! But I only bought 10,000units since first day split.

Cheer, invest1818

Jangan main contra pada Dsonic.

we should discuss Barakah.

好公司就是好公司，稳固成长。

secured contracts also like that the share price.
cant fly even thought got good news.

yes, Insas's price is rebound!

I juz back fr ...cabut gigi.

I trust my remisier to keep.

now at 2.17/2.18 start to climb back.

me too, hold to break rm1.00 above.

B4 shares split, I bought some few lots at rm7.00, rm7.983 ( averaged price ),
rm8.53 & rm9.54.
But I din keep and now I felt so regreted & my wife also argued with me.
Bcos I used the money to invested in O&G campany.
really felt regret & painful in my heart,
I say truely.
So, hold tight ur Dsonic share.

If I am like you holding and bought at rm3.00 b4 share split,
i will keep & keep the Dsonic's shares,
i will very appreciate my shares b4 split at rm3.00.
bcos more & more good news r coming in early 2014.

the price climb & climb sta D to rm5.00 or above.

antumn, what do u think dsonic?
thx.

Juz wanna to refresh to all investors ( included contra kakis)
below Dsonic's points & I hope yours dint lost ur direction to invested in DSONIC.

•Background. DSON is involved in the provision of information and communications technology (ICT) solutions,

A. which include smart card personalisation services and customisation of large-scale government ICT solutions.
B. Some of the key projects that the group was involved in are the rolling out of national identification (ID) cards in 2001 and the implementation of a payment multi-purposed card (PMPC) programme in 2003 to replace cards with magnetic stripes with chip-based ones.

•New MyKad the present core focus.

A. In 2011, DSON was awarded a MYR73.1m contract to supply 4m new MyKads with enhanced security features to the National Registration Department from 1 Jan 2012 until 31 Dec 2013.
B. Due to the overwhelming demand, the group received an extension worth MYR182.8m on its contract to supply 10m more raw MyKads to be delivered by December this year.
C. In view of the successful roll-out, our checks with sources indicate that the Government is looking to place orders for 10m more new cards worth MYR180-190m sometime in 1Q14 in its efforts to curb identity fraud-related crimes.

•Work started on new passports.

A. In 2012, DSON won a contract worth MYR284.7m to supply photo pages for 10m passports over five years.
B. The company started supplying the sheets in 3Q13, with management indicating an approximate annual run-rate of 2.4-2.5m copies.

•Earnings projection.

A. Leveraging on contributions from these two main contracts, we are forecasting for DSON to more than double its net profit by FY13F to MYR76.7m.
B. Taking into account the potential replenishment of 10m new MyKads come 2014, as well as likely margins enhancement post completion of its new MyKad assembly plant by end-FY13F,
C. we foresee the group’s bottomline potentially breaching the MYR100m threshold come FY15F.

Advices:
1. Please do not play contra in this solid further growth Datasonic campany.
2. Keep, accumulate & told for long run in this campany.
3. Please do not make comparision after share split's price to b4 share split's price.
( These 3 advices is given & imformed by my remisier, PJ )

Datasonic 真的是个好公司在ICT领域。

yes.
but collect secara berperingkat.

sorry , i salah tekan.
should be rm2.24.