Period

4Q15/FY15

Actual vs. Expectations

FY15 net profit of RM127.6m (-11%) was above our expectation, matching 107.7% of full-year forecast. Consensus comparison is unavailable as the stock is not widely tracked. The positive deviation can be attributed to the lower-than-expected effective tax rate (24.3% vs. forecasted 30.0%).

Dividends

As expected, a fourth and final DPS of 6.0 sen was declared, bringing FY15 DPS to 22.0 sen (vs FY14: 27.0 sen), which is in line with our expectation.

Key Results Highlights

YoY, FY15 revenue was flattish at RM547.4m due to the lower volume in LNG and timber-based products but was mitigated by positive contributions from palm oil and dry bulk segments. EBITDA declined by 4.8% to RM352.1m owing mainly to higher staff costs (+7.6%) but EBIT fell a steeper 14.0% to RM196.8m due to higher amortisation costs for intangible assets (10.7%) after adopting a different accounting policy in FY15. As a result, net profit fell 11.0% to RM127.6m, aided by lower interest and taxation expenses.

QoQ, 4Q15 revenue jumped 15.5% to RM151.0m which we think can be attributed to seasonality. The higher revenue lifted operating profit by 24.5% to RM57.3m with costs staying relatively stable. However, lower effective tax rate of 16.4% (vs. 3Q15: 29.0%) aided the higher net profit growth of 43.8% to RM42.0m.

Outlook

Moving forward, the handling of LNG vessel calls and cargoes is still expected to be the largest revenue contributor for the Group, backed by the interim phase of Samalaju Port but the LNG volume growth is expected to be subdued due to the weak 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.

The long-term prospect hinges on 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 lift FY16E net profit by 4.4% after factoring lower effective tax rate. We introduce FY17E earnings implying net profit growth of 4.9%

Rating

Maintain MARKET PERFORM

Valuation

Correspondingly, inline with the earnings uptick, our DCF-derived Target Price is adjusted higher to RM7.22 (from RM6.81). The TP implies 24.1x PER FY16E earnings, close to +0.5 SD over the 5-year mean.

Risks

Delay in construction works of Samalaju Port.

Sector risk: Worse-than-expected LNG demand.

Source: Kenanga Research - 29 Feb 2016