Period  1Q14

Actual vs. Expectations Within expectations. 1Q14 net profit of RM41.0m made up 27.0% and 26.0% of our full-year forecast and the consensus estimates.

Dividends  6.0 sen/share dividend was declared in this quarter, which is 20.0% lower than expected as the company intends to preserve more cash for CAPEX on Samalaju Port.

Key Result Highlights 1Q14 core net profit rose 4.4% QoQ to RM41.0m on the back of slightly lower operating expenses. Excluding construction revenue of RM72.7m, revenue dipped 4.3% due to lower LNG revenue.

 On a YoY comparison, the 1Q14 core net profit grew 12.7% YoY, due to lower effective tax rate of 21.4% from 34.2% previously on the back of investment tax allowance from construction of Samalaju Port. However, 1Q14 revenue after excluding construction revenue of RM72.7m dipped 4.2% due to lower LNG vessel calls of 120 in 1Q14 (from 128 in 1Q13).

Outlook  According to the management, the throughput contribution from Samalaju Port will be insignificant in the near-term and they expect the throughput contribution to amount to 4.9m MT/year possibly in 2016.

 Currently, two companies have commenced their operations there and more plants of other companies are expected to come on stream next year. However, currently only the interim phase of the port has been completed and it serves as a support for Bintulu Port to handle cargoes.

 Phase 1 of Samalaju is only expected to be completed in 2Q16 and we believe that the earnings could be marginally hit in the first year when with breakeven period of at least. c. 2 years

 Overall, we are still positive on the long-term prospects of the project as SCORE initiative spurs further economic activity in Sarawak.

Change to Forecasts We have maintained our forecast and assumptions. However, we have revised our dividend payout assumption to 24.0sen/share from 30sen/share previously.

Rating Maintain MARKET PERFORM

Valuation  Our TP is maintained at RM7.91 using DCF valuation based on WACC of 6.3% and terminal growth rate of 1.0%.

Risks to our Call (i) Lower-than-expected port and bulking division activities, (ii) higher-than-expected CAPEX for the Samalaju port, which could interrupt BIPORT’s steady cash flows, and (iii) delay in Samalaju project and delivery of 9th LNG train.

Source: Kenanga