Bintulu Port - New LNG train on the way BUY

• We maintain our BUY rating on Bintulu Port, with our fair value unchanged at RM8.33/share. Our DCF valuation assumes a cost of equity of 7.9% with a terminal growth rate of 1%.

• We understand Petronas would add an additional liquefied natural gas (LNG) train with a capacity of 3.6mtpa at its LNG complex in Bintulu. The new train will take its total capacity to 27.6mtpa. 

• The contract for the front-end engineering design (FEED) for the new train project has been awarded to JGC Corporation and to a partnership between Chiyoda Corporation and Saipem S.p.A.

• There will be no additional capex required as the three jetties would be able to accommodate 28mtpa of LNG throughput. Bintulu Port has, on average, handled about 23mtpa of LNG over the past five years. We are expecting throughput to be flat over the next few years as it is already operating at almost full capacity.

• We are not changing our estimates as the new LNG Train 9 would only start operations in 4Q2015, which is beyond our forecast horizon. Nonetheless, we estimate the additional 3.6mtpa throughput will bring in additional RM35mil (accounting 8% of FY10 revenue) in revenue – via berth charges – and circa RM10mil in pre-tax profit to Bintulu Port. Also, the impact to our DCF valuation will only be minimal, an increase of only 4%.

• That aside, we believe the interest on the company would be premised on its expected ‘monopoly’ on SCORE’s logistics requirement via Samalaju Port. The federal government has recently approved RM500mil to fund the maiden phase of the new port. 

Source: Amesecurities