9M16 net profit of RM106.7m is well within our (77%) and consensus (75%) expectations. A third single-tier interim dividend of 6.0 sen came within expectations (75%). We make no changes to our 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 but lower TP to RM6.72 (from RM7.22) on higher 10-year MGS yield.

9M16 net profit of RM106.7m came in well within our and consensus expectations at 77% and 75%, respectively. A third single-tier interim dividend of 6.0 sen was declared, bringing 9M16 DPS to 18.0 sen which is in line with our FY16E of 24.0 sen (3.8% yield).

Result highlights. QoQ, topline was flattish, but: (i) lower staff cost (- 35.6%) which was exceptionally higher in 2Q16 from payment of performance merits to staff and salary adjustment for Non-Executive staff, (ii) lower maintenance and operational supplies (-7.0%), and (iii) lower administrative expenses (-7.3%), allowed bottomline to improve by 22.3%. YoY-Ytd, topline improved (+5.3%) on higher contributions from LNG, alumina, palm oil and container. This was on the back of net margin improvements from: (i) higher other income (+134.7%), and (ii) lower effective tax rates of 23.9% (from 27.6%), resulting in bottom line increasing by 24.7%.

Outlook. Going 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 cargoes. Phase 1 of Samalaju Port is expected to be completed by 2Q17, but throughput contribution is not expected to be significant in the near term. BIPORT’s longer-term prospect hinges on Samalaju as it will potentially stimulate the economic activities in Sarawak on the back of the Sarawak Corridor of Renewable Energy (SCORE) initiative. We make no changes to our FY16-17E earnings of RM138.2-145.0m.

Maintain MARKET PERFORM but lower TP to RM6.72 (from RM7.22). Our DDM-derived TP is lowered after adjusting for a higher 10-year MGS of 4.00% (from 3.60%) closer to current levels post the MGS spike last week, and is based on a discount rate of 5.0%. Our TP implies a 22.4x PER FY16E earnings, which is on par with WPRTS’ FY16E PER of 22.9x, while the stock is also lacking strong near-term catalyst at this juncture. Further downside risks to our call include: (i) worse-than-expected L

Source: Kenanga Research - 22 Nov 2016