Frankly Speaking — How Much is Tanco Holdings Berhad Really Worth?

Tanco Holdings Berhad has long been a prominent player in Malaysia’s infrastructure and development landscape. With the announcement of its potential development and operation of a 480-acre landbank with capacity to fulfil 10 million Twenty-Foot Equivalent Unit (TEU) container port, the company’s valuation dynamics could undergo a transformative shift.

But how exactly would such a large-scale port impact Tanco’s worth, and what does this mean for its shareholders?

The valuation of a company operating a major port often hinges on a key industry metric: Enterprise Value (EV) per TEU.

This metric helps investors assess the worth of port operations by correlating the enterprise value of a port operator to the number of TEUs it can handle annually. Industry benchmarks show EV/TEU ratios ranging from $100 to $500, depending on factors such as location, operational efficiency, and profitability.

For Tanco’s valuation exercise, we’ll adopt a conservative EV/TEU ratio of $200, reflective of its potential as a robust, strategically located port with ample room for optimization.

To calculate the projected enterprise value of the proposed port, we multiply the annual handling capacity (10 million TEUs) by the EV/TEU ratio of $200. This results in an enterprise value of $2 billion for the port. Converting this into Malaysian Ringgit, assuming an exchange rate of 1 USD = 4.5 MYR, the port’s projected EV stands at RM9 billion.

When this is combined with Tanco Holdings’ existing market capitalization of approximately RM3.33 billion (as of November 2024), the company’s potential total valuation rises to an estimated RM12.11 billion. This figure assumes the successful development and operationalization of the port and does not account for other ancillary benefits, such as synergies with logistics and trade networks, which could further enhance Tanco’s long-term value.

Now, translating this enhanced valuation into the share price, Tanco Holdings currently has about 2.17 billion shares outstanding. By dividing the total projected valuation of RM12.11 billion by the number of shares, the company’s estimated share price could rise to approximately RM5.58 per share, a significant leap from its current price of RM1.43 per share. This hypothetical increase underscores the potential windfall for investors should the port project come to fruition.

Of course, several variables could influence this valuation. The actual profitability of the port, the operational efficiency achieved, and broader macroeconomic conditions, such as global trade dynamics, will play crucial roles. Additionally, the substantial capital expenditure required to construct a 10 million TEU port is a factor to consider. Tanco’s ability to secure favorable financing — whether through equity, debt, or partnerships — will directly impact the speed and success of the project.

Nevertheless, this exercise highlights the transformative potential of a major infrastructure initiative like a 10 million TEU port. For Tanco such a venture could catapult the company into the upper echelons of Malaysia’s listed entities, with a valuation that reflects its new role as a cornerstone of regional trade and logistics. For shareholders, the journey promises not just enhanced returns but also participation in the growth of a pivotal national asset.

In conclusion, while the valuation at RM5.58 per share is speculative and hinges on numerous variables, it paints a compelling picture of Tanco’s potential as a significant port operator. If executed successfully, this project would not just redefine the company’s trajectory but also position it as a key player in Malaysia’s infrastructure and trade future.