BENEFICIAL VENTURE: Photo shows one of Benelac’s sand pump vessel. Benalec has recently signed a term sheet for the reclamation works and sale of a land off the coast of Tanjung Piai, Johor, which is set to potentially pave a way for the group to be a key beneficiary.
KUCHING: Benalec Holdings Bhd (Benalec) has recently signed a term sheet for the reclamation works and sale of a land off the coast of Tanjung Piai, Johor, which is set to potentially pave way for the group to be a key beneficiary of the Malaysia and Abu Dhabi partnership.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) said in a research note yesterday, Benalec signed the term sheet with the State Secretary of Johor (Incorporated) and 1My Strategic Oil Terminal Sdn Bhd (1My) for the reclamation works and sale of approximately 1,000 acres of land off the coast of Tanjung Piai to construct and operate a crude oil and petroleum storage facility as well as a private jetty.
“We believe Benalec will be the key beneficiary from Abu Dhabi’s partnership with Malaysia, which potentially includes development of the RM21 billion strategic petroleum reserve facility in Johor,” the research firm opined.
It explained, the facility was likely to have a storage capacity of 60 million barrels of crude oil and petroleum storage facility, which would be used exclusively by Abu Dhabi.
The research further opined that it was optimistic on Benalec’s latest land reclamation as it showed some progress on its Johor land development, which had been long overdue since its initial approval in principle from Unit Perancangan Ekonomi Negeri (Upen), Johor back in November 2011 due to a prolonged Environment Impact Assessment (EIA) studies.
Additionally, it highlighed, “Given the massive project size of 1,000 acres and an assumed reclamation cost of RM2.4 billion over four years, we believe that Benalec will need to gear up further by at least another RM180 million per annum to execute the project assuming that the project is based on a progressive payment basis rather than on a build- than-sell basis.
“This will bring up its net gearing from 0.03-fold to 0.36-fold for the first year, which is still at a comfortable level.”
It further noted Benalec’s 1,000 acres land development forms part of (19 per cent) the total 5,245 acre Johor land development (Tanjung Piai having 3,485 acre and Teluk Penggerang; 1,760ac), which was granted the approval in principle previously.
Overall, the research firm opined, over the next 12 to 18 months, it expected the group to firm up more of such similar contracts.
In addition, it retained an optimistic view on Benalec’s performance on the back of a likely future boost from the development of its Johor lands. As such, it pegged the target price at an unchanged RM1.71 per share.