Investment Highlights

• We maintain BUY on Bintulu Port Holdings (BiPort) with a higher DCF-derived fair value (FV) of RM6.08/share (vs RM6.05/share previously) based on WACC of 9% and terminal growth of 4%. Our FV implies a FY23F PE of 21.6x, which is near 1 standard deviation above its 5-year historical average. No change to our neutral 3-star ESG rating.

• BiPort’s 9MFY22 core net profit (CNP) of RM92mil was above expectations, accounting for 80% of our fullyear forecast and 83% of consensus estimates.

• The deviation stemmed from a higher-than-expected throughput. Hence, we increase our earnings for FY22F by 5%, FY23F by 4%, and FY24F by 3% to adjust for higher throughput assumptions.

• Although BiPort does not have a dividend policy, the group has been generous to its shareholders with an average payout ratio of 59% from FY17 to FY21. BiPort has declared a DPS of 3 sen for 3QFY22, bringing YTD DPS to 11 sen, which makes up 84% of our FY22F dividend, based on a payout of 50%.

• 9MFY22 CNP grew 39% YoY to RM92mil in tandem with the operating revenue growth of 10% YoY to RM590mil. Meanwhile, 3QFY22 CNP expanded by 29% QoQ to RM29mil as operating revenue grew by 2% QoQ to RM198mil. The group achieve a throughput of 37.6mil tonnes (+6.3%) in 9MFY22.

• The Bintulu Port concession will expire on 31 Dec 2022, with the option to extend for another 30 years to 2052. The extension has been approved in principle, and BiPort and Bintulu Port Authority are in the midst of finalising the terms and conditions for the new concession agreement.

• An interim agreement has been signed on 24 Nov 2022 for 6 months from 1 Jan 2023. We expect the terms to be finalised by the expiry of the interim agreement on 30 Jun 2023.

• We remain cautious on BiPort’s short term outlook due to recessionary prospects and geopolitical tensions between western countries against Russia and China. Hence, key risks include (i) macroeconomic and geopolitical uncertainties affecting LNG demand; and (ii) port congestions, which may depress throughput volume.

• However, we are optimistic on the long-term outlook for BiPort, due to (i) strong and resilient LNG demand as Europe aims to reduce its dependence on Russian gas; (ii) the growth potential of Samalaju Industrial Port, underpinned by the Sarawak Corridor of Renewable Energy; and (iii) stable earnings and dividend yields.

• The stock currently trades at an attractive FY23F PE of 17x, which is near 1 standard deviation below its 5-year historical average PER.

Source: AmInvest Research - 29 Nov 2022