Investment Highlights

• We maintain BUY on Bintulu Port (BiPort) with a higher DCF- derived fair value (FV) of RM7.20/share (WACC: 9%, TG; 3.5%). Our FV implies a FY24F PE of 23x, a 1.5 standard deviation above its 5-year average PE of 15x. There is no FV adjustment for ESG based on our neutral 3-star rating. We are optimistic on rising LNG demand in Southeast Asia, and potential tariffs hike as the takeover by the state approaches in July this year.

• BiPort’s 1QFY24 net profit (CNP) of RM44mil was above our expectations. It accounted for 34% of our earlier full-year forecast and 36% of the consensus’ estimate.

• The deviation was mainly due to net interest expense (-76% YoY). BiPort’s interest expense fell to RM7mil in 1QFY24 from RM28mil in 1QFY23 due to the unwinding of lease concession as per the interim agreement with the Sarawak state government. Hence, we raise FY24F-FY26F earnings by 8% to account for these adjustments.

• BiPort declared an interim dividend of 3 sen per share in 1QFY24, which was flat YoY. However, our DPS forecasts have been raised in tandem with our earnings projections.

• YoY, BiPort's 1QFY24 net profit doubled to RM45mil on the back of an 11% topline growth. The growth was driven by increased handling of LNG cargo, bulk fertiliser and other cargoes at Samalaju Port.

• LNG throughput surged 8% to 7.2mil tonnes in 1QFY24 from 6.7mil tonnes in 1QFY23. This was underpinned by resilient demand from Japan, South Korea and China, in addition to new exports markets in Philippines and Kuwait.

• This is reflected in Press Metal’s 1QFY24 result, one of Samalaju Port key client, which posted revenue growth of 18% YoY due to higher quantity sold as manufacturers replenish inventories in 1QFY24, following de-stocking activities last year.

• BiPort's 1QFY24 net profit dipped by 4% QoQ to RM44mil as revenue declined by 3%, dragged by weak palm oil exports. BiPort also incurred higher finance costs in 1QFY24 due to a one-off adjustment of lease amortisation charges in the previous quarter.

• We view LNG demand to remain resilient as coal-to-gas switching trends could be seen in Southeast Asia, reducing reliance on coal-fired power generation. In 2023, Vietnam and Philippines began importing LNG for their gas-fired power plants.

• Key risks for BiPort are:
  
  (i) delays in the new privatisation agreement,
  
  (ii) macroeconomic and geopolitical uncertainties affecting LNG demand, and
  
  (iii) port congestion which may depress throughput volume.

• BiPort is currently trading at a decent FY24F PE of 20x, below its 5-year peak of 23x.

Source: AmInvest Research - 31 May 2024