Bintulu Port (BPH)’s 9MFY13 earnings came in stronger than we expected. A higher number of LNG calls boosted revenue growth while lower staff costs in 2QFY13 buoyed its profit margin. We upgrade our earnings forecasts as we expect 4QFY13 numbers to be seasonally stronger due to higher LNG demand. Maintain NEUTRAL, with our DDM-based FV at MYR7.51.

- Beating expectations. BPH’s 9MFY13 core net earnings of MYR104.5m (-7.2% y-o-y) made up 75% of our and street estimates, beating both forecasts as 4Q is typically a stronger quarter that may contribute 30-35% of its full-year earnings. On a quarterly basis, 3QFY13 revenue from the port services segment improved 10.7% y-o-y and 6.0% q-o-q owing to a higher number of vessel calls for  liquefied natural gas (LNG) (119, vs 2QFY13: 113, 3QFY12: 101). Other cargoes that contributed positively to revenue included bulk fertiliser, palm kernel and containers. 3QFY13 operating expenses were down MYR6.6m y-o-y as the company incurred additional cost relating to staff performance merits in 3QFY12. BPH declare a third interim single-tier dividend of 7.5 sen (unchanged y-o-y and q-o-q), in line with our expectations.   

- Earnings forecasts revised upwards. On expectations of LNG demand being seasonally stronger in 4QFY13, we revise our FY13F/14F earnings forecasts upwards by 6.5%/5.2% respectively, although we believe our numbers are on the conservative side. Management has guided for a cautious earnings outlook as operating expenses are higher and BPH no longer enjoys the tax incentive.

- Risks. A possible delay in the completion of Samalaju Port may give rise result to additional expenses and deferred contribution to the company’s earnings. Meanwhile, incurring higher capex may also hamper its ability to pay high dividends. 

- Maintain NEUTRAL. BPH’s growth prospects are still highly reliant on the completion of the first phase of Samalaju Port, which we understand is slated for completion by 2Q or 3QFY16. Maintain NEUTRAL, with our MYR7.51 FV unchanged based on a dividend discounted model (DDM) at a cost of equity of 7% and a terminal growth rate of 2%.

Source: RHB