Investment Highlights

• We maintain BUY on Bintulu Port Holdings (BiPort) with unchanged DCF-derived fair value (FV) of RM6.05/share (WACC: 9%, terminal growth: 4%). Our FV implies a FY23F PE of 22x which is 1 standard deviation above its 5-years historical average PER. No change to our neutral 3-star ESG rating.

• Our earnings estimates are maintained following our site visit to Samalaju Industrial Park. Here are the key takeaways:
  • The majority of Samalaju Industrial Port’s throughput growth will be from Wenan Steel’s (WS) plant. Land clearing for the plant is 75% completed and WS is in the midst of negotiating the Power Purchase Agreement with Sarawak Energy. The plant is slated to be fully commissioned by FY25F.
  • We also gathered that a methanol jetty will be set up at Bintulu Port. The methanol jetty will facilitate the exports of methanol produced by Sarawak PetChem Bintulu Methanol Plant, which will be operational in 1QFY24, with production capacity of 1.75mil tonnes per annum (TPA).
  • Malaysia Phosphate Additives Sarawak’s (MPAS) plant is currently commissioning its 2nd furnace. Eventually MPAS’s plant will have 4 furnaces to produce Yellow Phosphate (YP) with a total production capacity of 48K TPA. These furnaces are expected to be fully commissioned in Dec 2022 and commercial production is scheduled in 1Q2023.
  • OM Materials (Sarawak) is in the midst of converting 4 of its ferrosilicon (FeSi) furnaces to 2 manganese alloy furnaces and 2 metallic silicon furnaces. The manganese alloy furnaces were commissioned in 3Q2022, and the metallic silicon furnaces are expected to be operational in Dec 2022. Upon completion, the plant will have total capacity of 721K 800K TPA vs. 700K 760K TPA currently.
• The stock currently trades at a FY23F PE of 18x, vs its 5-year peak of over 22x. We like BiPort for 1) the resilience of the group's LNG exports, supported by long-term contracts with Petronas vs Westport's more variable containerised throughput; 2) strong growth potential of Samalaju Industrial Port; and 3) stable earnings & dividend yields.

Source: AmInvest Research - 17 Oct 2022