Period       1Q13/3M13

Actual vs. Expectations   Bintulu Port Holdings (“BIPORT”) net profit of RM36.4m was within our expectations, accounting for 24.4% of our full-year projection. However, it was slightly  below the consensus expectations at 22.8% of the market fullyear projection (RM159.3m). 

Dividends    As expected, a 1st interim DPS of 7.5 sen has been declared for the quarter.

Key Results Highlights    QoQ, the net profit was up 15.5% (from RM31.5m) mainly due to the lesser operating costs incurred in 1Q13. In 4Q12, the net profit was diluted by maintenance work on the port’s infrastructure, vessels docking and maintenance, fuel expenses and administrative expenditure. 

YoY, the 1Q13 net profit was down 16.8% (from RM43.8m) mainly due to a higher expenditure that was mainly contributed by expenses incurred for charter hire, fuel, depreciation of PPEs and the amortisation of intangibles in the current quarter.

Outlook    The near term focus will still be on BIPORT’s terms and conditions of the Samalaju concession agreement, which will come in after it finalises all its corporate exercises. Its private placement for 60m new shares at RM6.65 has been finalised but its SUKUK bonds have yet to be completed.

The catalysts for BIPORT’s earnings are: 1) a higher tariff for cargo handling when the Samalaju Industrial Port starts operation (the initial phase is expected by 2H13) and, 2) higher LNG vessel calls and port services when the ninth LNG train for MLNG is completed by 2016.

Change to Forecasts     As the earnings are within expectations, we are maintaining our earnings estimates. 

Rating  Maintain MARKET PERFORM

Valuation     We have increased the share base in our earnings model to 460m (from 400m) as we have included in the number of shares that will arise from its 15% private placement exercise that was finalised recently. We have also fine-tuned our WACC assumption to 6.3% (from 9.6% previously) as we adjusted our risk premium downwards to reflect the current environment.

Our new FY14 based target price has thus been finetuned to RM7.05/share from RM7.03/share previously. 

Given the potential total return of just 2.1% in the share price (a 2% downside to our target price but mitigated by a 4.2% dividend yield), we are maintaining our MARKET PERFORM call on the stock. 

Risks    (1) Lower than expected port and bulking division activities; and (2) a higher than expected CAPEX for the Samalaju port, which could interrupt BIPORT’s steady cashflows.

Source: Kenanga