- We maintain BUY recommendation on Benalec Holdings, with an unchanged fair value of RM2.48/share, based on the Sum-Of-Parts (SOP) methodology.

- Benalec announced on Bursa Malaysia yesterday evening that its 70%-owned unit Spektrum Kukuh Sdn Bhd, 1MY Strategic Oil Terminal Sdn Bhd (1MY) and The State Secretary Inc (S.S.I.) has mutually agreed to extend the period of validity for a binding term sheet for a further six months.

- Recap, Benalec had on 12 March 2013, entered into binding term sheets with the latter duo for the sale and reclamation of 1,000 acres of land in Tg.Piai, Johor.

- As such, this extension is to facilitate the finalization of terms and conditions of the Sale & Purchase Agreement (SPA).

- While we acknowledge that the timeline of this deal has been pushed back, its investment merits and dynamics remain firmly entrenched.

- 1MY is a vehicle formed to construct, commission, operate and maintain an oil & petroleum storage facility at Tg.Piai.

- This follows a report in The Star last March that revealed that the Abu Dhabi government was to forge a JV with 1MY to invest RM21bil in a petroleum storage facility in Tg.Piai. The capacity at the facility was touted for storage of up to 60 million barrels of crude oil.

- Notably, Tg.Piai – located near the vibrant Jurong petrochemical hub and blessed with a natural depth of over 20m that can handle large VLCCs – remains a viable location for oil storage for both strategic as well as security reasons.

- A successful execution of this deal – anchored by future investments from Abu Dhabi – is crucial to the repositioning of Tg.Piai as a future oil hub.

- The associated inflow of potential FDI arising from this deal would not go unnoticed by the ruling BN government, just a month after the recently concluded 13th General Elections, we believe.

- This will likely galvanize more interest from other offtakers to invest in its land concessions at Tg.Piai, and also Pengerang in South Johor.

- As such, our FV of RM2.48/share still stands. This is based on only 2,000 acres out of a total of 5,485 acres accorded to Benalec.

Source: AmeSecurities