PORT operator Integrax Bhd (formerly known as Ganz Technologies Bhd) is looking at setting up reciprocal terminals in the region most likely in Sumatra, Indonesia. This may form the stepping stone to venturing into larger markets namely India and China, says its chairman and managing director Harun Halim Rasip.
“We have Lumut Port, which is our primary asset at the moment. So, we are basically looking at reciprocal terminals elsewhere. We are looking at three projects, particularly within our own region and that next to us ... China on the east side, India on the west. The biggest obvious opportunity in South-East Asia is Indonesia,” he says.
However, any such venture overseas will begin on a small scale and henceforth, the company will make its move progressively.
“The business model we've always adopted has been to start small and then take it step by step. We tap funds from the private sector ... the banks ... so we have to take it cautiously,” Harun says in an interview with BizWeek.
Integrax owns and operates two terminals in Lumut. It owns 100 per cent of Pelabuhan Lumut Sdn Bhd (Lumut Port) and 49 per cent of Lumut Maritime Terminal Sdn Bhd. Lumut Maritime Terminal, which Integrax had invested some RM85 million in, had started out with a 200-metre berth, but it has gradually grown to 500 metres currently.
“The discipline is there to ensure we don’t end up wasting excess facilities,” he adds.
Integrax, says Harun, is keen to replicate what it has done locally overseas. “A little industrial development in the back (hinterland) to stir greater economic activity in the location and to lock in the customer base.”
In the nine months ended Sept 30 last year, Integrax made a net profit of RM4.81 million on the back of a RM7.73 million turnover. In the previous corresponding period, the company made a loss of RM5.97 million and RM3.01 million turnover over the previous corresponding period.
In 2001, Harun and brother Amin Rasip, via Jurukapal Marine Services Sdn Bhd, acquired a 40 per cent interest in Ganz Technologies (which became a PN10 company after disposing of its rubber glove business) and subsequently, injected Lumut Port into the company and changed its name.
Future plans of the company involve diversifying its operations. “When you start dealing in bulk, you eventually (need to) get into processing – the service aspect of it. (Towards this end), we are looking at the processing of agricultural products. We have been planning such expansions, and complimentary activities over the last two years. The port business requires constant planning, as the gestation period is very long,” Harun adds.
Lumut Port, with a depth of about 12 metres caters to smaller vessels, while Lekir Bulk Terminal, located 12 km away with a depth of 20 metres is able to handle larger vessels. As such, through the two terminals, Integrax is able to handle a whole range, providing “different economics for those doing bulk and intermediate cargo.”
Harun says: “In the bulk business, you suffer the tyranny of distance, you have to take the shortest route. Hence, Lumut Port faces no competition. We mainly cater to the surrounding hinterland, which has actually blossomed since we started operations ... and we don't actually compete to get cargo from other parts.
As for Lekir Bulk Terminal, he says, it was designed to accommodate the possibility of carrying out transhipment, storage and other value-added services. “The capabilities we have built in have various provisions to enable us to add on equipment as and when the business grows. We anticipate spending a minimum of RM50 million within the next five years on Lumut Port.”
The outlook of Lumut Port is also encouraging with the government's move to upgrade the Ipoh-Lumut road that will further ease the transportation of goods to the port premises. Lumut Port currently has a total of 25 clients, including long-term contracts. Tenaga Nasional Bhd's RM6 billion 2,100 Mega Watt coal-fired Janamanjung plant is a main client of the port with a 25-year contract, allowing vessels to call at the port carrying coal.
By the end of this year, Lekir Bulk Terminal is expected to be supplying the Janamanjung plant some five million tonnes of coal, under a contract which is valued at around RM80 million a year. The first cape size vessel (about 120,000 dead weight tonnes) to call at the port arrived last week with the first shipment for its one million tonnes of coal.
Harun says: “The contract with Tenaga (Nasional Bhd) has a large fixed element of revenue ahead. We also have such long-term arrangements with cement companies and palm oil companies. These long-term contracts are our defensive contracts.”
Apart from Tenaga, the other large clients include Pasir Gudang Edible Oils, and cement giants Lafarge SA, which holds a 52.62 per cent in Malayan Cement Bhd.
Even after having inked long-term deals to ensure a steady income stream, Harun says the company is looking for more clients to supplement the group's income.
“You have to remember that ports are a stimulus for growth. For example, the lime stone industry in Perak was not really going anywhere in a big way until Lumut Port came about. All of a sudden there was an economical way to get the limestone out, making it (Malaysian limestone) even competitive internationally,” he says.
“The elements of defensiveness, and the competitiveness of the port in terms of pricing are really good. We also have a good hinterland and all the infrastructure requirements of a good port; also our hinterland is amenable to this bulk activity. We started out with nothing in 1995, and handled some 3 million tonnes of cargo last year. Last year was good, this year should be better,” Harun adds.
Some market observers expect the ports throughput to grow by 40 per cent this year with the increasing number of manufacturers, both foreign and local, setting up base in Perak.
Meanwhile, Integrax, to bring its appeal to institutional investors, is planning a transfer to the main board of the Kuala Lumpur Stock Exchange.
Harun says: “It's just a matter of inevitability, because once our retained earnings reach a certain limit, about RM30 million, we will look at transferring to the main board.
In terms of share capital and asset size, we are already a main board company anyway. And we have assets valued at about half a billion at least.”
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