Investment Highlights

• We downgrade Bintulu Port (BiPort) from BUY to HOLD with a lower DCF-based fair value (FV) of RM7.00/share (WACC: 9%, TG; 3%) from RM7.30/share previously.

• Our FV implies a slightly lower FY25F PE of 19x (vs. 20x previously), +1 standard deviation above its 5-year average PE of 15x.

• We think that a tariff hike might take longer-than-expected to materialise due to the lengthy process of streamlining all Sarawak ports under one authority.

• Following the Sarawak state's takeover by end-2024, BiPort will come under the purview of Bintulu Port Authority Sarawak (BPAS).

• We anticipate the tariff hike might only come after the establishment of a centralised port authority, which may take one to two years.

• Nevertheless, for 2HFY24, we envisage LNG demand to be strong, driven by deliveries of deferred cargoes and seasonal factors.

• Also, BiPort will commence handling marine services for PetChem's methanol in 2HFY24.

• For FY24F, we believe that LNG will remain the main contributor with a 55% revenue share.

• Ocikumho is envisaged to commence production in 2QFY25 and Wenan Steel in 3QFY25.

• Exports of LNG from BiPort are expected to plateau at 25-27mil MT.

• Despite this, LNG exports are still healthy following an increase in exploration activities.

• We expect re-rating catalysts to be premised on i) a confirmation of a tariff hike ii) LNG capacity expansion, and iii) exponential growth from Samalaju Port.

• BiPort is currently trading at a fair FY25F PE of 17x, 13% above its 5-year average of 15x.

Source: AmInvest Research - 19 Sep 2024