Bintulu Port Holdings - MARKET PERFORM - 1 Jun 2012

Period    1Q12

Actual vs. Expectations

 1Q12 net profit of RM43.7m was largely in-line with expectations accounting for 29.3% of our full-year expectations (RM149.2m) and 26% of consensus estimates (RM168.5m).

Dividends   Interim DPS of 7.5 sen was declared. This was slightly below our assumed 8.0 sen interim DPS.

Key Results Highlights

 YoY, 1Q12 net profit was up 8.1% mainly spurred by the growth of its bulking revenue contribution, which grew by a whopping 51.1%. (1Q12: RM8.3m versus 1Q11: RM5.9m) PBT margins also expanded by 0.6ppts (1Q12: 45.6% versus 1Q11: 45%).

 QoQ, the core net profit increased by 65.4% despite only 5% higher in revenue. The significant jump was mainly due to lower cost in 1Q12 as compared to the preceding quarter (4Q11) which includes higher amortisation of leased concession assets and maintenance dredging expenses. We believe such adjustment exercises will typically occur at year-end.

Outlook   We expect slower 2Q12 earnings as it is seasonally the weakest quarter for BIPORT. 

 We note that the interim injunctions by Integrated Marine Works Sdn Bhd (IMW) have been set aside by the courts, as such a dredging awards for Samalaju port could be soon.

 Going forward, the catalysts for BIPORT’s earnings are: 1) Higher tariff for cargo handling in Samalaju Industrial Port when it is completed by 2H13; and 2) higher LNG vessel calls and port’s services when the ninth LNG train for MLNG is completed by 2016.

Change to Forecasts

 We have fine-tuned our FY12-13E revenue forecasts higher by 0.5% and 2.0% respectively, mainly due to an increase in the bulking division’s earnings. 

 However, the increases were mitigated by higher cost (staff and maintenance) assumptions, hence, no change in our net profit forecast for FY12 and FY13. 

 We are also introducing our FY14E net profit estimates of RM160.3m which incorporates around 3% of revenue growth, largely also driven by the earnings growth from the bulking division. 

 Our DPS for FY12-13E is reduced to 37.5sen p.a. (from 40.0sen p.a. previously) as we expect BIPORT likely to reserve cash at this juncture due to hefty capital commitment in the near term.   

Rating  MAINTAIN MARKET PERFORM

Valuation    We have rolled over our valuation basis to CY13 to arrive at our new Target Price of RM7.20 (RM7.00 previously), deriving from our DCF valuation (WACC:9.6%).

Risks   1) Lower-than-expected port and bulking division activity; 2) Extensive capex for the Samalaju port that will eat into company’s cashflow position. 

Source: Kenanga