Samalaju Port to be the key catalyst for Bintulu Port

Posted on August 27, 2011, Saturday

SOLE LOGISTICS PLAY: Through the ownership of Samalaju Port, Bintulu Port will be one of the exciting stories to emerge from the Sarawak Corridor of Renewable Energy (SCORE) to support the Samalaju Industrial Park, SCORE’s primary growth area.

OSK Research Sdn Bhd (OSK Research) noted that Bintulu Port’s chances of securing the concession were high given its reputation as a leading liquefied natural gas (LNG) vessel operator and this could be a form of a compensation should there be a revision in LNG tariffs.

To recap, the management hinted at a possible 12 per cent cut in LNG tariffs, lease rentals would have to come down by 20 per cent in order to fetch the same operating margins.
On the other hand, citing AmResearch Sdn Bhd (AmResearch), fees related to the handling of LNG vessel calls and cargo remained as the key contributors to Bintulu Port’s topline, accounting for 72 per cent of total operating revenue.
AmResearch expected the trend to continue going forward, although bulking operations and other cargoes were also expected to boost Bintulu Port’s revenue.
Nonetheless, Bintulu Port turned in a net profit of RM31 million for the second quarter of the financial year 2011 (2QFY11), taking its first half of the financial year 2011 (1HFY11) earnings to RM72 million.
Additionally, AmResearch also noted that the impact of Samalaju Port would be enormous. At the outset, the research firm was guided that the raw materials throughput would be in the region two million tonnes – at par to its current drybulk throughput tonnage.
The impact of the new tonnage on Bintulu Port’s discounted cash flow (DCF) would be massive giving a 24 per cent boost to AmResearch’s current DCF value to RM10.30 per share.
AmResearch assumed an average 30 per cent to 40 per cent annual growth in tonnage throughtput for the first 10 years to be driven by strong industrial activities in the Samalaju Industrial Park.
AmResearch maintained its fair value at RM8.33 per share derived based on a DCF valuation assuming a cost of equity of 7.9 per cent with a terminal growth of one per cent. Meanwhile, OSK Research retained its fair value at RM6.86 based on a dividend discount model approach.