Period

1Q15

Actual vs. Expectations

Net profit of RM35.5m (-13.5%) was within expectation by accounting for 22.3% of our full year forecast. Consensus comparison is not available as the stock is not widely tracked.

Dividends

Dividend of 6.0 sen (vs 1Q14: 6.0 sen) has been declared, which is in line with our expectation.

Key Results Highlights

YoY, 1Q15 revenue increased marginally by 2.0% to RM133.6m due to the higher volume in LNG and dry bulk cargo. EBITDA grew in tandem with the revenue at 0.5% to record RM94.3m. However, higher amortisation of intangible assets (+19.7%) brought PBT down by 9.8% at RM55.3m. Meanwhile, net profit declined by 13.5% to RM35.5m as a result of a higher effective tax rate of 24.7% (vs 1Q14:21.4%).

QoQ, revenue was lower by 10.2% which we think can be attributed to seasonality. EBITDA was lower by 6.1% at RM94.3m due to the lower revenue but net profit was only lower by 4.4% in comparison due to the lower effective tax rate of 24.7% vis-à-vis 27.7% in 4Q14. As a result, the Group recorded net profit of RM35.5m.

Outlook

Moving forward, the handling of LNG vessel calls and cargoes are still expected to be the largest revenue contributor for the Group, backed by the interim phase of Samalaju port while the LNG volume is expected to be subdued due to the slowing demand.

Throughput contribution from Samalaju Port is expected to be insignificant in the near future but the completion of Phase 1 of Samalaju by 2Q16 could further improve volume.

All in all, we are optimistic on the long-term prospects of Samalaju as it will potentially boost and stimulate the economic activities in Sarawak on the back of the Sarawak Corridor of Renewable Energy (SCORE) initiative.

Change to Forecasts

We made housekeeping changes to our earnings forecasts after updating the figures from its annual report. FY15E-FY16E net profits were fine-tuned down by 0.9%-0.6%.

Rating

Maintain OUTPERFORM

Valuation

Our DCF-derived Target Price of RM8.08 is maintained with risk factors maintained. (WACC: 6.5%, g: 1.0%). The TP implies 23.5x PER FY15E earnings, below its +1 SD 5-year mean, which we think can be justified with the earnings growth potential from Samalaju Port.

Risks

Delay in construction works of Samalaju Ports

Sector risk: Worse-than-expected LNG demand.

Source: Kenanga Research - 1 Jun 2015