Wednesday, August 24, 2011

Bintulu Port’s diversification to provide earnings excitement

TO BE FINALISED: Photo shows tug boats at Bintulu Port’s marine berth. Kenanga Research says Bintulu Port’s tariff revisions were yet to be finalised by the government.

KUCHING: Bintulu Port Holdings Bhd’s (Bintulu Port) has submitted a proposal to build and operate Samalaju Port following the state government’s invitation, according to analysts.

Kenanga Investment Bank Berhad (Kenanga Research) saw this as a catalyst for Bintulu Port where a more diversified customer base would provide some earnings excitement to the group despite its dependence on liquefied natural gas (LNG) vessels.

The research house said due to its net cash position at 68 sen per share, there was more room for Bintulu Port to expand rather than pure dividend play counter.

On the company’s result, the research house stated that overall, the financial year 2010 (FY10) net profit of RM150 million came in within expectations.

Kenanga Research saw the cargo volume and vessel calls to be higher by five per cent year-on-year (y-o-y).
The research house stated that the cost-cutting measurement implemented since the financial year 2009 (FY09) to weather the economic crisis had contributed positively to its operating profit which saw its earnings before interest, tax, depreciation and amortisation (EBITDA) increased from 43 per cent to 48 per cent.

Kenanga Research said the declared dividend of 15 sen in the fourth quarter of 2010 (4Q10) made up the full year financial year 2010 (FY10) total declared dividend at 37.5 sen.

The research house pointed out that the total revenue was higher by 5.9 per cent as ports service revenue increased by 2.7 per cent.

Kenanga Research highlighted that the dry bulk segment had improved by more than 300 per cent during the quarter while the cargo and LNG segment revenue was lower by 13 per cent. It added that the net profit was nine per cent higher as due to better traffic in the quarter.

Nonetheless, the research house was not entirely bullish on the financial year 2011 (FY11) global economic growth as it expected Bintulu Port’s traffic to improve moderately at the average of two to three per cent.

The key risk of Kenanga Research’s assumption was higher than expected LNG vessel calls during the peak of global crude oil prices.

Still, the research house said Bintulu Port’s tariff revisions were yet to be finalised by the government. It added that the management reiterated that there were no meaningful updates at this juncture.

Overall, Kenanga Research pegged Bintulu Port’s shares with the target price at RM6.83 per share.

The Borneo Post Online

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