Sime Darby Utilities md Timothy Lee said that the Weifang Port “has been profitable since day one of the takeover”, and is ranked by BMT Consulting as one of the most efficient and cost-effective ports in China.
In the last financial year, Weifang Port in Shandong Province, posted a pre-tax profit of just under MYR90m ($22m) on a revenue of MYR300m.
Sime Darby acquired the port from the local Government in 2005 and has since invested MYR2bn to turn the seaport into a profitable mid-sized seaport with 15 berths, from four.
By the end of the year, this seaport with more than 500 customers, will have 23 berths under its MYR1.4bn (2012-2017) expansion plan.
Lee said: “Sime Darby group’s directive is to go for careful capital expenditure (capex) and an initial public offering (IPO) is one option to monetise our assets.
“But we need to look at the right timing. To make the IPO successful, we need to have good enterprise value and a good success story to share.”
Lee said that they were also open to mergers and acquisitions, and swaps.
“We are open and flexible. The objective is to minimise expenditure and maximise returns.”
Although the timing of the IPO has not been decided, the port has a success story for potential investors.
It is planning to develop China’s first halal industrial park and first halal port that will not incur too much capex, as the strategy is to look for joint-venture (JV) partners. The port operator is talking to leading industrial players and provincial governments as JV partners.
The halal projects at Weifang Sime Darby Port will be launched in the 2017/18 financial year, with 270ha of Weifang Port’s land being set aside for the park.
The 50-year leasehold land was bought at low rates from the Government after the takeover in 2005.
The halal park-port plan was mooted at end-2014 by Weifang Port’s head of marketing and logistics Lai Ah Chek after he saw vast opportunities in a halal park, in view of food security problems in China and the rising need for such facilities in the region.
As Weifang Port will be selling its land to JV partners, the net capital outlay for the halal plan will be small.
The infrastructure for the park will take up about MYR124m, while the building of four warehouses will require at least MYR198m. And to turn existing berths into halal facilities, the port only needs to change some handling equipment.
“The halal industrial park will help generate business for the port, as all raw materials for manufacturing at the industrial park will go in and out of our port,” Lee told a Malaysian delegation.
Weifang Port is also considering business cooperation with a nearby major port.
“There is a lot of international routing in this region. For us to get into international cargoes, it is more sensible to work with major ports,” Lee said.
Weifang Port, which is deepening its sea depths to 12m to accommodate 35,000-tonne container ships, aims to position itself as an intra-Asian player and domestic feeder port. It has started a shipping link with South Korea since last December and is talking to shippers from Japan.
From Malaysia, Kuantan Port is sending its bauxite to Chinese customers via Weifang. Last year, about 2m tonnes of bauxite was shipped into Weifang Port.
With a plan to deepen the seaport to 13.7m to take in 50,000-tonne ships by end-2019, Weifang Port is projected to post MYR270m in pre-tax profit, or a rise of 200% from the current level, by 2022.
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