- We maintain our BUY call on Benalec Holdings with an unchanged fair value of RM1.25/share, pegged at a 45% discount to its sum-of-parts value.

 - Yesterday, Benalec announced on Bursa Malaysia that its Detailed Environmental Impact Assessment (DEIA) study for a proposed reclamation contract in Tg. Piai has been approved by the Department of Environment (DOE) on 23 January.

 - Via its 70%-owned subsidiary, Benalec had earlier submitted the DEIA for the Tg. Piai Integrated Petroleum & Petrochemical Hub together with Perbadanan Setiausaha Kerajaan Johor.The DEIA approval is valid for two years from the date of the letter of approval.

 - Phase 1 of the project is set to commence next month. Its components involve the construction of oil terminals, jetties, bridges linking the island to the mainland, as well as dredging works.

 - Benalec is in the midst of finalising its funding options to kick-start reclamation works, which we believe, could involve around 100 acres to 200 acres initially.

 - As at 30 September 2014, the group was in a healthy net cash position of ~RM48mil. Furthermore, there are c.RM312mil worth of land sales (173 acres) with SPAs to be progressively recognised over the next three FYs, we understand.

 - More importantly, Benalec has crossed a major milestone in the group’s quest to reposition Tg. Piai as a future oil hub.

 - Undeniably, Tg. Piai’s deep water depth and close proximity to the Jurong Petrochemical Hub puts it in a prime position to tap into spillover demand for oil storage from the various MNCs that are currently operating in Singapore.

 - We nevertheless believe Benalec’s real litmus test starts now. With the DEIA approval now secured, investors’ attention will naturally gravitate towards management’s ability to secure the maiden offtakers for Tg.Piai.

 - The group recently announced that its binding term sheet with 1MY Strategic Oil Terminal Sdn Bhd and the State Secretary Johor (Inc) has been extended by another six months to 11 June 2015.

 - The deal with 1MY is for the reclamation and sale of ~1000 acres in Tg.Piai for the construction and operations of a crude oil and petroleum storage facility together with a private jetty.

Source: AmeSecurities