Kenanga Research & Investment

Bintulu Port Holdings - A Safe Harbour Amid Macro Headwinds

Publish date: Wed, 01 Mar 2023, 11:24 AM

BIPORT’s FY22 results met our forecast but missed consensus estimate. It benefitted from: (i) stronger LNG shipments on China reopening and robust demand from Japan, (ii) higher palm oil exports, and (iii) rising inbound and outbound cargoes movements in Samalaju Industrial Park. We maintain our FY23F net profit, TP of RM6.00 and OUTPERFORM call.

FY22 core net profit met our forecast but missed consensus estimate by 10%. It declared a fourth interim NDPS of 3.0 sen (ex-date: 23 Mar; payment date: 24 Mar 2023) in 4QFY22 vs. 3.0 sen paid in 4QFY21, bringing FY22 total NDPS to 14.0 sen (FY21: 12.0 sen), within expectation.

YoY, FY22 revenue rose 8% driven by: (i) a 6% revenue growth at Bintulu Port, and (ii) a 20% revenue growth at Samalaju Industrial Port. In terms of cargo type, the LNG segment recovered in 4QFY22 on stronger demand from China reopening and robust demand from Japan, while the non-LNG segment (comprising dry bulk, break bulk, liquid bulk and containerised cargoes) grew stronger driven by the plantation sector (import of fertiliser, export of palm products) and heavy industries in Samalaju Industrial Park (import of alumina, coal and coke, export of aluminium and manganese).

FY22 core net profit rose significantly higher by 20% (excluding one-off item of RM9.4m), boosted by margin expansion alongside rising cargoes handled at Samalaju Industrial Port. To recap, Samalaju Industrial Port commands better margins given its much higher tariffs than Bintulu Port. These were partially offset by: (i) higher fuel cost, (ii) a slight increase in staff cost (due to the upward revision in the minimum wage that benefited 21% of its total workforce), and (iii) a higher effective tax rate at 28.2% vs. 22.9%.

QoQ, 4QFY22 revenue grew marginally as stronger revenue from Bintulu port (+5%) driven by China reopening and robust demand from Japan, though partially offset by lower revenue from Samalaju Industrial Port (-13%) which we believe was due to weaker cargoes volume from OMH (OP; TP: RM2.95). Its effective tax rate was lower at 24.9% vs. 36.1%, courtesy of recognition of investment tax allowance.

4QFY22 core net profit fell 8% on lower cargoes handled at Samalaju Industrial Port as mentioned above.

Forecasts. We maintain our FY23 net profit and introduce our FY24 numbers.

We keep our DCF-derived TP of RM6.00 (WACC: 5.8%; TG: 2%). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 3).

We like BIPORT for: (i) its steady income stream from handling LNG cargoes for Malaysia LNG Sdn Bhd (that typically makes up close to 50% of its total profit), (ii) it could potentially enjoy a step-up in earnings if Bintulu Port is granted a significant hike in its port tariffs, and (iii) the tremendous growth potential of Samalaju Industrial Port backed by rising investment in heavy industries in Samalaju Industrial Park. Maintain OUTPERFORM.

Risks to our call include: (i) inability of Bintulu Port to secure an adequate port tariff hike to offset escalating operating cost, and (ii) a global recession hurting heavy industries in Samalaju Industrial Park.

Source: Kenanga Research - 1 Mar 2023

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