1Q16 net profit of RM40.1m came in within our (29.0%) and consensus (27.7%) expectations. A first single tier interim dividend of 6.0 sen was declared, within expectations (25%). We make no changes to FY16-17E earnings of RM138.2-145.0m. The handling of LNG vessel calls and cargoes is still expected to be the largest revenue contributor. Maintain MARKET PERFORM and TP of RM7.22.

1Q16 net profit of RM40.1m came in within our and consensus expectations at 29.0% and 27.7%, respectively. A first single-tier interim dividend of 6.0 sen was declared, which is in line with our FY16E DPS of 24.0 sen (3.4% yield).

Result highlights. BIPORT’s topline was down QoQ (-6.0%) mainly from lower volume in LNG, palm kernel, container and silica quartz products. All in, this dragged down QoQ net profits (-4.5%), but the decline was cushioned by better EBIT margins (+5.2ppt) on: (i) lower administrative expense (-47.1%), and (ii) lower maintenance and operational supplies (- 8.4%). On a positive note, earnings were up YoY (+13.1%) from: (i) a stronger topline (+6.2%) driven by palm oil, dry bulk cargo, general cargo and container segments, and (ii) higher contribution from other income.

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 palm oil, container, bulk fertiliser and alumina, but the LNG volume growth is expected to be subdued due to 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 4Q16 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.

Note that we make no changes to our FY16-17E earnings of RM138.2-145.0m. Maintain TP at RM7.22 and MARKET PERFORM call. We maintain our DCF-derived Target Price of RM7.22. The TP implies 24.0x PER FY16E earnings, close to +0.5 SD over the 5-year mean. Downside risks to our call include: (i) worse-than-expected LNG demand, and (ii) delay in construction works of Samalaju Port.

Source: Kenanga Research - 27 May 2016