BIPORT’s 9MFY22 results beat our forecast (due to stronger-thanexpected performance by Samalaju Industrial Port) but missed market expectations. We like BIPORT for the steady income stream from handling LNG cargoes and the growth potential of Samalaju Industrial Port. We raise FY22-23F net profit forecasts by 9-3% respectively, lift TP by 2% to RM6.00 (from RM5.90), and maintain our OUTPERFORM call.

Above our forecast. 9MFY22 core profit of RM92m came in above our expectation at 85% of our full-year forecast but missed market expectations at only 70% of the full-year consensus estimate. The key variance against our forecast came largely from higher-thanexpected topline growth at Samalaju Industrial Port of 25% YoY during 9MFY22 (vs. our full-year FY22F assumption of 21%), we believe, due to stronger inbound and outbound cargoes from heavy industries in the hinterland driven by strong demand for their products amidst production curbs in Europe on the back of an energy crisis.

It declared a third interim NDPS of 3.0 sen in 3QFY22 (unchanged from 3QFY21), bringing 9MFY22 NDPS to 11.0 sen (vs. 9.0 sen in 9MFY21).

YoY, 9MFY22 revenue rose 9% driven by: (i) a 6% revenue growth at Bintulu Port, and (ii) a 25% revenue growth at Samalaju Industrial Port.

In terms cargo type, the LNG segment was slightly weaker due to a slowdown in LNG exports to China amidst intermittent lockdowns as well as a hiccup in Sabah volume output due to a pipeline leak, 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).

9MFY22 core net profit rose significantly higher by 39%, boosted by margin expansion driven by growing cargoes handled at Samalaju Industrial Port. To recap, Samalaju Industrial Port commands better margins given its much higher tariffs vs. those of 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 29.5% vs. 28.0%.

QoQ, 3QFY22 revenue rose 2% with stronger revenue from Samalaju Industrial Port (+12%) alleviated the weaker Bintulu Port contribution (-2%) from the slower LNG volume from Malaysia LNG Sdn. Bhd. due to recent lockdowns in China as well as the Sabah pipeline leak that happened towards end-September 2022. Effective tax rate was higher at 36.1% vs. 24.2% from higher recognition of prosperity tax. 3QFY22 core net profit still rose by a larger 29% due to margin expansion with growing cargoes handled at Samalaju Industrial Port.

We like BIPORT for: (i) the steady income stream from handling LNG cargoes for Malaysia LNG Sdn Bhd (that typically makes up close to 50% of its total profits), (ii) it could be poised for 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.

Source: Kenanga Research - 29 Nov 2022