Syscorp expects strong cargo volume to continue

Shin Yang's domestic container feeder vessel, MV Danum 112 at Northport wharf. - Filepic

KUCHING: Shin Yang Shipping Corp Bhd (Syscorp) expects strong cargo volume generated by its container shipping, which has given a major boost to its bottom line, to be sustained in the second half of 2023.

According to chief operating officer Richard Ling, Syscorp has maintained an utilisation rate of over 80% for its container shipping space as compared with between 50% and 60% in early 2022.

The group currently operates a fleet of 16 container vessels, of which 14 are deployed to service the ports between Peninsular Malaysia, Sabah and Sarawak while two for the Sarawak-Singapore route.

He told StarBiz: “There is a slight increase in cargo volume transported between Sarawak and Singapore on a weekly service.

“On the return trip, we transport mostly transhipment cargo as the main international liners only call at Singapore port,” added Ling.

Syscorp has also converted two sets of tug and barge to ship containers on shorter routes within Malaysia.

In addition, the group is still leasing two container vessels to a Chinese company for cargo shipment between Hong Kong and China.

Ling pointed out that the charter rates for these two container vessels are still good, even though the rates have come down, tracking the sharp correction of international freight rates for container shipment.

The increase in container cargo volume and profit margin as a result of higher utilisation rate of shipping space drove up Syscorp’s shipping segment revenue by 20.5% to RM200mil in third quarter ended March 31, 2023 (3Q23) from RM166mil in 3Q22.

The segment’s pre-tax profit surged by 59.6% to RM40.2mil from RM25.3mil previously.

In 3Q23, group net profit climbed to RM44.8mil in line with an increase in revenue to RM234.8mil.

Ling said the profit margin for the group’s container shipping had improved to nearly 20% in the January to March 2023 quarter from between 10% and 15% in the corresponding period in 2022.

Ling also expects 4Q23’s (April to June) earnings to be maintained as “the cargo volume shipped was good because of strong demand for goods during the recent Hari Raya and Gawai Dayak festivals.”

For the second half of 2023, he, however, said it would be a bit challenging as container freight rates are expected to come down by between 10% and 20%.

However, the lower freight rates would be compensated by load factor, Ling added.

According to Ling, local shipping companies are facing competition from second-tier international liners, including from China, which have shifted their operations back to Sabah and Sarawak because international freight rates have plummeted, some back to pre-Covid levels.

“To attract cargo, these foreign shipping companies are said to be trying to undercut their local competitors on freight rates,” he noted.

However, Ling said these international liners, which are deploying older container vessels, only operate at selective bigger ports such as Kuching, Bintulu and Kota Kinabalu but “their market shares are relatively small.”

Foreign shipping firms are allowed to pick up and transport domestic cargo after the federal government lifted the cabotage policy five years ago.

Meanwhile, Syscorp group is also involved in dry bulk cargo transportation in the region and the shipment of methanol and oil.

Ling pointed out that Syscorp has adopted a new business model to provide total logistic solutions for both sea and land transportation as well as door-to-door delivery services and this has attracted both new and big customers.

“By using our services, manufacturers or companies do not have to worry about who will track their cargo from warehouse to port and port to warehouse as we will take care of it,” he added.

Syscorp group has also introduced the land transportation services from port to destination and from warehouse to warehouse services, after it acquired Melinau Transport Sdn Bhd (MTSB) for RM43mil in 2021.MTSB is involved in freight carriage primarily servicing all major ports in Sarawak.

As part of its expansion plan in Malaysia, Syscorp will acquire a 60% stake in Johor-based Mewah Exim Sdn Bhd for about RM9.54mil.

Mewah Exim is principally involved in shipping freight and forwarding, and its core business activity is as freight forwarder primarily servicing major ports in Sarawak and Sabah.

Mewah Exim is an established shipping freight and forwarding agent in Johor region. With a wide connection and market know-how, Mewah Exim manages to sustain more than 35% of the export volume from Pasir Gudang to various ports in Sabah and Sarawak.

“The proposed acquisition will increase the presence of Syscorp group especially for transhipment cargoes from the international routes to Malaysia as well as enhance timely and reliable delivery services to Syscorp group’s overall operations.

“In addition, Mewah Exim is able to provide an integrated total logistics solution and door-to-door delivery service using a single entry point.

“The board (of directors) also believes that the proposed acquisition will provide Syscorp group with more opportunities to participate through a wider network of offices in Peninsular Malaysia for efficient coordination of transportation shipments and scheduling as a whole,” said Syscorp in its announcement on the proposed acquisition last week.

The proposed acquisition is expected to be completed by the third quarter of this year.

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