MSM eyes majority share in sugar market

KUALA LUMPUR: MSM Malaysia Holdings Bhd aims to control the Singaporean midstream sugar market as well as become a major player in the Malaysian market by 2018, soon after it kick starts its new refinery in Johor.
"I hope by 2018, I am able to control the entire Singaporean market as well as majority of the Malaysian market, if not all," its president and group CEO Datuk Sheikh Awab Sheikh Abod (pix) told reporters after its AGM here yesterday.
Currently MSM has an 18-20% market share in Singapore, and a 64% share in Malaysia.
With a competitive cost structure, Sheikh Awab believes the group will be able to further penetrate the Singapore market, which is expected to consume 420,000 to 450,000 tonnes of sugar per annum by 2017.
MSM's third refinery in Tanjung Langsat, Johor is on track to start operation by mid-2017.
"We hope the ground breaking will be some time in August and should be completed in 22 months," he noted.
He said MSM, which is now heavily dependent on the midstream sugar business, is looking to diversify its income stream to cover the upstream and midstream segments to reduce its operating risks.
"There is a lot of risk, if the world raw sugar price is down, then we're able to make good profits, however, if it is otherwise, then our profits will be trimmed," he noted.
Over the longer term, Sheikh Awab said MSM targets upstream and downstream business to contribute 30% to the group's bottomline, while the balance 40% will come from the midstream business.
However, he said the group will only step into the upstream business as soon as next year, citing the time was not right to undertake any plans in the upstream space.
"We feel that the worst is not over in certain countries, we'd rather wait a little while longer. When we can see there is an upward trend in plantation and milling business, then we'll get ourselves in it," he said, adding that there would be more certainty by then despite having to pay a premium.
Sheikh Awab said MSM is in "advanced" discussions with two Indonesian firms for its expansion into the upstream business in the republic, with other targeted countries including India, China and Thailand.
As for the downstream side, countries with a large population such as Indonesia are the priority for expansion, but it is still at the preliminary stage.
In terms of investment costs, it will be more expensive for the upstream business compared with midstream activities, according to Sheikh Awab.
Apart from acquisitions, he said the group will also pursue foreign strategic alliances to expand its business operations, with the Asean region as the main focus.
MSM's net profit slightly increased to RM257.01 million for FY14 compared with RM254.68 million in FY13. For the first quarter ended March 31, 2015, its net earnings were up 26.08% from RM56.33 million to RM71.03 million.