Bintulu Port Holdings - Private Placement Details Finalised T

News  Bintulu Port (“BIPORT”) announced that it had: 1) entered into a conditional subscription agreement for a 15% private placement (60m shares) to the State Financial Secretary Sarawak (SFSS) or a nominated company of the SFSS at an issue price of RM6.65/share; and 2) proposed an exemption for SFSS from the obligation to undertake a mandatory offer for all the remaining BPHB Shares not already owned by SFSS.

 The issue price for the placement shares was at a discount of 5% to the VWAP of RM7.00.

 The exercise is expected to be completed by 2QCY13.

Comments  We are not surprised by the news as BIPORT already mentioned in end-2012 that it is looking at up to a 15% private placement and a Sukuk bond issuance.

 This exercise will raise gross proceeds of RM399m, which will be utilised for the equity portion (RM600m) of the Samalaju Port development, which has been guided to cost approximately RM2.2b.

 Post the placement, BIPORT’s share base will expand by 15% and result in an EPS dilution of 13% per annum while our SOP-based target price would fall to RM6.11 (from the current target price of RM7.03). SFSS’s stake in BIPORT will increase to 39.7%. Assuming its nominated company takes the placement, its direct stake will be diluted to 26.7% and its indirect stake at 13.0%.

 We believe the finalisation of the placement is a clear sign that the Samalaju port development is steadily progressing. Going forward, we believe BIPORT will announce the finer details of: 1) the Samalaju concession agreement and; 2) the Sukuk bond (estimated to be RM1-1.1b) where CIMB is the lead arranger, later.

Outlook  The catalysts for BIPORT’s earnings are: 1) a higher tariff for cargo handling when the Samalaju Industrial Port starts operation (the initial phase is expected by 2H13) and 2) higher LNG vessel calls and port services when the ninth LNG train for MLNG is completed by 2016.

Forecast  We are maintaining our share base estimate pending the completion of the private placement exercise.

 However, management has guided that they are unlikely to pay the special dividend of 7.5 sen like in 2012; as such, we have reduced our FY13-14 NDPS forecasts to 30 sen (37.5sen). This reduced the stock’s net dividend yield to 4.3% (from 5.7%).

 We suspect that management has reduced the dividend payout to conserve cash for further funding of the Samalaju port. The reduced dividend implies cash savings of RM30m per annum.

Rating   Maintain MARKET PERFORM

Valuation  Our target price is maintained at RM7.03 based on a DCF valuation (WACC: 9.6%).

Risks  (i) Lower than expected port and bulking division activities and (ii) a higher than expected CAPEX for the Samalaju port, which could interrupt BIPORT’s steady cashflows.

Source: Kenanga