Property development to carry Suria through port business slowdown

PETALING JAYA (June 8): Suria Capital Holdings Bhd projects that its property development arm will record substantial earnings in its financial years 2015 and 2016 (FY2015 and FY2016).

It expects these earnings to offset the downtrend of its port business for FY2015 which has been sluggish due to the local economy, reports The Edge Financial Daily today.

Suria’s forecast is based on the fact that its Jesselton Quay project received regulatory approval at end-March.

“We [can probably] launch Jesselton Quay in the third quarter this year,” Suria CFO Ng Kiat Min told The Edge Financial Daily.

The Sabah-based port operator entered into a joint venture (JV) agreement in May, 2013, with SBC Corp Bhd to develop the project, which will sit on 16.25 acres of Suria’s 23.25-acre land parcel in Kota Kinabalu.

The project has an estimated gross development value (GDV) of RM1.8 billion, spread over eight years.

As landowner, Suria will receive a minimum guaranteed return of RM324million, or 18% of the estimated GDV, in scheduled payments throughout the development period, or RM 40.5million a year.

Suria also signed a JV agreement with Gabungan AQRS Bhd in March this year to jointly develop another project called One Jesselton Waterfront, a mixed-use development on the rest of its land parcel in Kota Kinabalu, which will have a net sale value (NSV) of RM1.8 billion.

Suria will be entitled to 18%, or up to RM198 million of the total NSV of the project from Gabungan AQRS. The project is expected to be completed in six years.

“Suria Capital’s minimum entitlement will include Suria’s corporate office worth RM52.01 million, a retail mall worth RM114.39 million and RM31.6 million cash,” said Ng.

He added that the construction of One Jesselton Waterfront to expected to begin at the end of this year, upon regulatory approval.

Ng cautioned that the expected earnings for FY2016 will depend on the launch prices of the JV projects with SBC Corp and Gabungan AQRS, which would depend on market conditions.

The port business has been the main revenue contributor to Suria’s earnings, accounting for some 85% of group revenue in FY2014, with the logistics and bunkering arms segment at 12%, ferry terminal business at 2% and contract and engineering business at 1%.

Ng said Suria will continue to focus on its port business but did not rule out the possibility that revenue contribution from its property development business may overtake that of its port business in future.