MIDF Investment Bank Bhd (MIDF Research) has maintained a SELL call on Suria Capital Holdings Bhd, revising its target price to RM1.02 from RM1.60 following the lower-than-expected fourth-quarter results. The adjustment reflects the impact of Sapangar Bay Container Port (SBCP) transitioning into a joint venture, reducing its direct earnings contribution.

However, the research house remained optimistic about the long-term benefits of the partnership, as DP World's involvement is expected to enhance the port's efficiency and growth prospects. DP World, as one of the top five global port operators with an estimated 9% market share, could bolster SBCP's position in regional trade.

Suria posted a core loss after tax and minority interest (LATAMI) of RM2.7 million in 4QFY24, bringing full-year core profit after tax and minority interest (PATAMI) to RM41.7 million, representing 79% of the research house's full-year projection. The shortfall was attributed to SBCP's earnings reclassification, alongside weaker-than-expected conventional cargo volumes, which stood at 93% of the full-year assumption.

The transition of SBCP to DP World's management resulted in a sharp -66.1% year-on-year decline in container throughput for 4QFY24, as Suria now holds only a 49% stake in the venture. Conventional cargo throughput also weakened, falling by -10.5% year-on-year, primarily due to lower bulk oil volume at the Sabah Oil & Gas Terminal (SOGT) sufferance wharf. Consequently, port operations revenue declined -36.2% year-on-year, significantly impacting the company's overall performance. The core LATAMI of RM-2.7 million represented a steep -142.7% year-on-year drop compared to the previous year's corresponding quarter.

This quarter marked the first full three-month period since the SBCP joint venture transition in September 2024. Compared to the preceding quarter, container throughput similarly fell by -66.1%, reflecting the shift in management control. SBCP previously accounted for 72% of Suria's total twenty-foot equivalent unit (TEU) volume in FY23, with the remaining volume coming from Tawau Port and Sandakan Port. Meanwhile, conventional throughput declined -3.8% quarter-on-quarter. The quarter's core LATAMI of RM-2.7 million also reflected a -116.9% quarter-on-quarter drop from 3QFY24.

Given the revised earnings structure, MIDF Research has lowered its earnings forecasts for FY25F and FY26F by -35% and -36%, respectively. The research house noted that an earnings catalyst could materialise from a long-anticipated port tariff revision, which, if implemented, could provide a boost to Suria's financial outlook. While the near-term impact of the SBCP transition remains a concern, analysts acknowledge the potential upside from Suria's strategic positioning and DP World's expertise in global port operations.