Investment Highlights

• We resume our coverage on Bintulu Port with a HOLD recommendation and a DCF-based fair value of RM6.72 per share. We increase our net earnings forecasts for FY17-18 by 15%-22%, and introduce our FY19 numbers.

• Bintulu Port’s 1QFY17 net earnings grew 26.1% YoY to RM50.6mil. The results came in above expectations, making up 38% of our full-year forecast and 34% of consensus. A first interim dividend of 6.0 sen per share was declared, as expected.

• The encouraging performance was attributed to the strong growth in operating revenue recorded in 1QFY17. Operating revenue grew 13.5% YoY to RM161.1mil, mainly due to higher revenue from LNG, bulk fertilizer, alumina, container and ferroalloy cargoes

• Both the port services and bulking services at Bintulu Port recorded positive YoY revenue and earnings growth in 1QFY17. Revenue for port services increased 11.7% YoY to RM148.6mil, with pre-tax profit jumping 34.5% YoY to RM48.2mil. Revenue from bulking services rose 6.8% YoY to RM8.6mil, while pre-tax profit surged 44.6% YoY to RM4.9mil in 1Q17.

• Bintulu Port’s Samalaju Industrial Port also recorded strong revenue growth in 1QFY17. Revenue from the port’s operation at Samalaju using the interim facilities in 1Q17 soared 352% YoY to RM3.9mil. However, this port incurred a pre-tax loss of RM1.0mil from a RM1.8mil pretax profit in 1QFY17.

• Samalaju Industrial Port will commence full operation from 2H17, which should contribute to higher revenue from this port in FY17 compared to FY16. However, we expect the expenditure relating to amortization of equipment, infrastructure and concession assets as well as the higher finance charges related to the sukuk issuance for the port’s financing to have a downward impact on the overall performance of the group

• We expect the handling of LNG vessel calls and cargoes to remain as the main revenue contributor for the group in FY17. We also anticipate an increase in throughput from palm oil, bulk fertilizer, petroleum products and woodchips to contribute towards positive overall revenue and earnings growth in FY17. However, due to the expected losses from the recognition of expenditure at Samalaju Industrial Port upon its full operation, we expect a lower profitability for Bintulu Port in FY17 compared to the previous year

Source: AmInvest Research - 24 May 2017