- We maintain our BUY recommendation on Benalec Holdings with an unchanged fair value of RM1.25/share.

- This pegs the stock at a 45% discount to its sum-of-parts value.

- Benalec announced on Bursa Malaysia yesterday evening that it has signed an MoU with Pestech International for the supply of power infrastructure.

- Benalec's wholly-owned unit, Tg. Piai Maritime Industries Sdn Bhd, had signed the MoU with Pestech Sdn Bhd (PSB) for exclusive exploratory efforts to establish power supply infrastructure at the Tg. Piai Integrated Petroleum and Maritime Industrial Park (TPIPMIP).

- Both parties will begin discussions to form a definitive contract within six months from the signing of the MoU.

- Under the MoU, PSB will be entrusted to design the electrical infrastructure for TPIPMIP.

- Subsequently, it will carry out the design, manufacturing, testing, delivery of equipment & installation, construction as well as commissioning of the required infrastructure on a turnkey basis.

- The terms and conditions of the resulting project contract will be determined later. - We foresee this latest move as a measure of Benalec's commitment to develop its 3,485-acre Tg. Piai concession into a future oil storage hub via TPIPMIP.

- Apart from power, we expect the group to be in the midst of planning for other infrastructure requirements within the industrial park (e.g. water, sewage, road).

- This comes as the group had earlier submitted plans to raise RM200mil via convertible bonds.

- We expect initial works of between 100 acres to 200 acres at Tg. Piai to commence within the next few months.

- All in, we believe the increased level of activities will improve the visibility of TPIPMIP when attracting major international oil storage players.

- However, as always, the real challenge will be finding trailblazing offtakers. Negotiations with 1MY Strategic Oil Terminal is expected to be concluded by 11 June. 

Source: AmeSecurities