Bintulu’s 9MFY12 earnings of RM31.1m were within our estimates, accounting for 72% of our full-year forecast. 3Q earnings dropped 7.2% y-o-y on lower LNG contribution after a major shutdown of its LNG plant in July. Furthermore, the expansion of its non-LNG segment widened costs. While we like Bintulu Port’s prospects, there are still uncertainties associated with its tariff negotiations andthe concession agreement for Samalaju Port. Maintain NEUTRAL, with an unchanged FV of RM7.10, based on DDM at 7.5% required return.
Lower LNG contribution. Bintulu’s 9MFY12 earnings of RM100.6m (YTD: -10%) came in line with our estimates, accounting for 72% of our full-year forecast. Note that the consensus numbers may not be useful at this juncture as many have yet to adjust their earnings estimates to reflect the change in accounting standards. 3Q earnings dropped 7.2% y-o-y on lower contribution from the higher-margin LNG, with its vessels calls slipping from 111 calls to 101 calls in 3QFY11, following a major shutdown of its LNG plant in July this year. However, the lower LNG revenue contribution was offset by higher revenue from its general cargo. 4Q is expected to be a stronger quarter due to rising LNG demand and increasing shipments of goods and construction materials to Samalaju.
Operational expansion drives up costs. Widening costs arising from the expansion of the non-LNG segment, coupled by lower revenue contribution from the higher-margin LNG, led to a decline in the group’s profit margins. 3QFY12 core PBT margins dipped 3 ppts to 33.2%. The higher costs were attributed to expenses incurred on third-party cargo-handling services for stevedoring and alumina oxide, maintenance expenses and charter hire of new tugboats.
Waiting for Samalaju. The hive of industrial development in Samalaju is fuelling demand for cargo handling in the immediate to longer term for both Samalaju and Bintulu ports. The two ports are expected to see cargo demand increasing by 13m-14m tonnes and 100,000 TEUs by 2015. However, the issues of tariff cuts for its LNG berthing and lease payments remain unresolved, while Samalaju’s concession terms are yet to be finalised. Nevertheless, we expect negotiations on the reduction of berthing tariff and lower lease rentals to be finalised by year-end.
Maintain NEUTRAL. While we like Bintulu Port’s prospects, there are still uncertainties associated with its tariff negotiations and the concession agreement for Samalaju Port. Maintain NEUTRAL on Bintulu Port, with an unchanged FV of RM7.10, based on DDM at 7.5% required return.
Source: OSK
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