KUCHING: Bintulu Port Holdings Bhd’s (Bintulu Port) potential catalyst lies in the possibility of being a beneficiary of the build-operate-transfer (BOP) job for Samalaju Port, which serves as a key node for the Sarawak Corridor of Renewable Energy (SCORE) initiative.
The Sarawak government had decided to set up a state port at Samalaju to serve industries located within SCORE, one of Malaysia’s five economic growth corridors.
The state government had sent a letter of intent to the group last month to submit a detailed BOP proposal for a new seaport within the Samalaju enclave. According to Bintulu Port’s announcement to Bursa Malaysia, should the proposal be accepted by policymakers, the company or its wholly owned subsidiary would be appointed to undertake the job.
OSK Research Sdn Bhd (OSK Research) in its research report stated that that the chances of securing the concession was high given its reputation as a leading liquefied natural gas (LNG) vessel operator.
The research firm further stated that this could be a form of a compensation should there be a revision in LNG tariffs, which remained inconclusive over the past few years.
Bintulu Port’s management was hinting of a possible 12 per cent reduction in LNG tariffs and lease rentals that should be reduced by 20 per cent in order to fetch the same operating margins.
“Our hypothesis test shows, the potential reduction in LNG tariffs would reduce our target price as earnings will decline by an average of 3.5 per cent to 4.5 per cent over the next four to five years,” said the research team. It said that although margins were relatively higher by two per cent points, the earnings would decline by RM5 million to RM7 million given the lower revenue fetched.
On the financial front, Bintulu Port posted a higher pre-tax profit of RM48.65 million for its third quarter ended September 30, 2010 (3QFY10) compared with RM33.34 million in the previous corresponding quarter. Revenue rose to RM111.47 million from RM102.69 million previously.
In a filing to Bursa Malaysia last week, the company said its better performance was attributed to its port services with a revenue of RM105.81 million generated from the handling of LNG vessel calls and cargo being the major contributors.
The company said the handling of LNG vessel calls and cargoes would continue to be Bintulu Port’s most important revenue contributor. “A positive growth is also expected from the bulk service operations and from the handling of cargoe and vessel calls for palm oil, palm kernel, bulk fertiliser, alumina, general cargo and containers,” it added.
“Given the high margins on LNG calls, the contribution from non-LNG is still insignificant at this moment,” said the research team.
For its nine-month period ended September 30, 2010 (9MFY10), it achieved a higher pre-tax profit of RM147.44 million, compared with RM123 million recorded in the previous corresponding period.
OSK Research said the results were within expectation, with its 9MFY10 earnings representing 72 per cent of its estimates. The research firm also expected the company’s fourth quarter results to turn out stronger on the back of seasonally higher demand during the winter season.
It further added that the BOT securing for the Samalaju Port concession outcome was likely to be known only some time before the Sarawak state election.
Based on a dividend discount model approach, the research firm pegged its target price at RM6.86 per share, although from a valuation stand point, this would be hard to access as there had so far been no confirmation on the setting up of the Samalaju smelting plant, which would be a key volume contributor.