Period  3Q13/9M13

Actual vs. Expectations Bintulu Port Holdings (BIPORT) reported net profit of RM43.7m in 3Q13 which brought the 9M13 net profit to RM104.2m. Slightly below our expectation, it accounts for 70% of our full-year estimate. However, it is within the market’s expectations at 75% of full-year forecast. The main reason for the variance to our forecast was the higher-than-expected operating costs incurred on maintenance work to the port infrastructure and amortisation of leased concession.

Dividends  As expected, a 3rd interim DPS of 7.5 sen was declared in 3Q13 which is the same as the preceding quarter.

Key Results Highlights QoQ, 3Q13 revenue rose by 8.5% due to higher LNG and port operations revenue. Higher number of vessel calls also contributed to the increase in revenue (3Q13: 119 calls vs 2Q13: 113 calls). Core net profit surged 81.5% QoQ due to lower staff cost (-37% QoQ due to the inclusion of payments of performance merits to staff in 2Q13) and lower tax expenses.

 YoY, core net profit for 3Q13 increased by 39.7% on the back of: (i) lower tax expenses, (ii) lower interest expense, and (iii) 12.5% surge in revenue driven by higher revenue from port and bulker services.

Outlook  Samalaju port development is well on track with the Interim Phase targeted to be completed by year-end. The management guided that the throughput contribution from Samalaju port will be insignificant in the near term and it expects the throughput contribution to reach 4.9m MT/year possibly in 2016.

 Currently, two companies have commenced operations in the area and there are more companies’ plants are expected to come on stream next year.

 On the other hand, Phase 1 of Samalaju is expected to be only completed in 2Q16 and it will have the capacity to handle 18m MT of cargo per annum. However, we believe that the earnings could be hit in the first year of operations due to higher amortisation and depreciation costs.

 Overall, we are still positive on the long term prospects of the project and we have not factored in Phase 1 of the project pending more clarification from the company in the future.

Change to Forecasts We have trimmed our earnings forecast for FY13 and FY14 by 7.2% and 4.8%, respectively, on lower operating margin assumptions and higher assumed amortisation cost.

Rating Maintain UNDERPERFORM

Valuation  Our DCF based target price is reduced by 1% to RM6.98 from RM7.05 previously as a result of a cut in earnings forecast.

 We maintain our UNDERPERFORM call.

Risks to Our Call (i) Better-than-expected port and bulking division activities

(ii) Lower-than-expected CAPEX for the Samalaju port

Source: Kenanga