Investment Highlights

• We maintain BUY on Bintulu Port Holdings (BiPort) with an unchanged DCF-derived fair value (FV) of RM6.08/share based on a WACC of 9% and terminal growth rate of 4%. Our FV implies a FY23F PE of 20.9x, 2-standard deviations above its 5-year average PE of 18x. There is no FV adjustment for ESG based on our 3-star rating.

• BiPort’s FY22 core net profit of RM128mil was within our expectations but 15% above consensus.

• Although BiPort does not have a dividend policy, the group has been generous to its shareholders with an average payout ratio of 50% from FY17 to FY22. BiPort has declared a DPS of 3 sen for 4QFY22, bringing its total DPS to 14 sen for FY22. This translates to a payout ratio of 50%.

• FY22 operating revenue rose 9% YoY to RM747mil as throughput for LNG improved by 9% and non-LNG by 10%. The higher revenue coupled with lower depreciation and interest expenses resulted in a 29% expansion in CNP in FY22.

• On a quarterly basis, 4QFY22 LNG throughput improved by 7% while non-LNG rose by 5%. CNP expanded 25% QoQ to RM36mil in 4QFY22 due to the reversal of a deferred tax asset for a concession asset.

• Bintulu Port concession expired on 31 Dec 2022 with the option to extend for another 30 years until 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 was signed on 24 Nov 2022 for 6 months from 1 Jan 2023 onwards. We expect the terms to be finalised – with a potential tariff revision – by 30 Jun 2023.

• Looking ahead, we have pencilled in a 4% growth in FY23F throughput volume. We are optimistic on BiPort’s outlook due to (i) the strong and resilient demand for LNG as Europe aims to reduce its dependency 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.

• Key risks are (i) macroeconomic and geopolitical uncertainties affecting LNG demand; and (ii) port congestions which may depress throughput volume.

• The stock currently trades at an attractive FY23F PE of 17.9x, below its 5-year peak of over 20x.

Source: AmInvest Research - 1 Mar 2023