BIPORT’s FY23 results met expectations. Its 4QFY23 core net profit jumped 19% QoQ on a pick-up in cargo volumes, which could be signs of green shoots of recovery. We continue to like BIPORT for its stable income stream from handling LNG cargoes. We maintain our forecasts, TP of RM5.55 and MARKET PERFORM call.

BIPORT’s FY23 core net profit (excluding one-offs at RM7.8m) met expectations. It declared a fourth interim NDPS of 3.0 sen (ex-date: 22 Mar; payment date: 25 Mar 2024). Its FY23 cumulative NDPS stands at 12.0 sen, within expectations.

YoY, BIPORT’s FY23 revenue fell 3% due to a weak top line performance from Samalaju Industrial Port (-12%), we believe, due to weaker cargo volumes from key customers, i.e. PMETAL (MP; TP: RM4.90) and OMH (OP; TP: RM1.80). Its LNG cargo volume fell marginally as weaker demand from China, was offset by the demand from Japan and South Korea. On the other hand, the non-LNG segment (comprising dry bulk, break bulk, liquid bulk and containerised cargoes) fell 8% due to lower plantation throughput (i.e. the import of fertilisers, the export of palm products) and weaker inbound and outbound cargoes from heavy industries in Samalaju Industrial Park (i.e. the import of alumina, coal and coke, the export of aluminium and manganese). Its core net profit fell marginally on a lower tax.

QoQ, BIPORT’s 4QFY23 revenue rose 16% driven by recovery in both Bintulu Port (+17%) due to the recovery in LNG demand from China, and Samalaju Industrial Port (+9%) from a pick-up in cargo volumes from key customers, i.e. PMETAL and OMH.

Its core net profit rose by a steeper 19% on volume expansion at the high-margin Samalaju Industrial Port (vs. Bintulu Port) which fetched higher port tariffs (vs. Bintulu Port) and lower finance cost & effective tax rate under an interim lease arrangement (from Jan 2023 to Dec 2024) for Bintulu Port.

Forecasts. We maintain our FY24F forecasts and introduce our FY25F numbers.

Valuations. We also maintain our DCF-derived TP at RM5.55 (WACC: 5.5%; TG: 2%). There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 3).

Outlook. We acknowledge that the challenges in China economy at present will have a bearing on the demand for aluminium and manganese. However, we are starting to see a recovery in inbound and outbound cargo volumes from Samalaju Industrial Port key customers, i.e. PMETAL and OMH in 2HFY23. We believe its key customers have an edge over their peers in the international market as their products have low-carbon footprint given the hydro power input. Also, as it stands today, Western countries still have outstanding sanctions on Russian aluminium (that makes up c.6% of world aluminium production) and hence will have to look for alternative sources of aluminium supply.

Meanwhile, Bintulu Port Authority (BPA) is in the process of transferring its control from the Federal government to the Sarawak government. Concurrently, Bintulu Port is under an interim lease agreement until Dec 2024 pending the completion of the handover of BPA control.

Investment case. We continue to 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) a potential 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 MARKET PERFORM.

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 2024