KUCHING: Bintulu Port Sdn Bhd (Bintulu Port) recently announced that Intergrated Marine Works Sdn Bhd (IMW) had sought an injunction on the ongoing public tender of dredging works for the Samalaju Port Development Project in Bintulu, Sarawak.
According to Kenanga Investment Bank Bhd (Kenanga Research), the injunction would not have a material impact on Bintulu Port, as well as the construction of Samalaju Port in terms of any project delays or cost overruns.
The management said that in the worst case scenario, the dredging works, with the value of RM500 million would be awarded to IMW.
The research firm verified that IMW was the subsidiary of Inai Kiara Sdn Bhd, the largest Malaysian-based dredging company.
So far, the company had been awarded ample dredging works in Malaysia and was rumoured to have been granted a 15 year-concession to undertake all dredging works at seven major ports in Malaysia, particularly Kuantan, Bintulu, Kemaman, Port of Tanjung Pelepas, Klang, Johor Port, and Penang Port by the Ministry of Finance (MOF).
IMW was seeking an injunction against Bintulu Port to halt the open tenders for dredging works based on a supposed exclusivity option endowed to the company by a long term agreement with the MOF.
Based on the discussion with the management, the open tender for the dredging portion of the Samalaju Port development was to close soon and involved bids from both local and foreign players.
Kenanga Research understood that the management did not have a significant negative view on the injunction.
As far as it was concerned, no dredger had been awarded the project and very minimal funds had been spent for the port’s development.
Awarding the portion of the project to IMW was the worst case scenario, which meant that the project would still go on.
The injunction could result in a slight delay in the progress of the Samalaju Port Development Project, as the management believed that the main objective was still to get the project running as soon as possible, with the full completion of the port expected to take three years, according to Kenanga Research.
In addition it would also diversify Bintulu Port’s earnings and the research firm expected the matter to be dealt with swiftly. Dredging works were scheduled to commence by mid-2012 according to newspaper reports.
The research firm capped a fair value of RM7 per share based on a discounted cash flow derived valuation of WACC at 9.6 per cent.
In addition, it also favoured Bintulu Port’s attractive dividend yield of 5.7 per cent as well as for its defensive earnings.
The forecast also highlighted that the research firm had yet to incorporate the potential earnings from Samalaju Port as the project was still in its preliminary stages.