Bintulu Port - New LNG train on the way BUY

Stock Name: BIPORT
Company Name: BINTULU PORT HOLDINGS BHD

Research House: AMMB

Price Call: BUY

Target Price: 8.33

' We maintain our BUY rating on Bintulu Port, with our fair valueunchanged at RM8.33/share. Our DCF valuation assumes a cost of equity of 7.9%with a terminal growth rate of 1%.

' We understand Petronas would add an additional liquefied naturalgas (LNG) train with a capacity of 3.6mtpa at its LNG complex in Bintulu. Thenew train will take its total capacity to 27.6mtpa. 

' The contract for the front-end engineering design (FEED) forthe new train project has been awarded to JGC Corporation and to a partnershipbetween Chiyoda Corporation and Saipem S.p.A.

' There will be no additional capex required as the three jettieswould be able to accommodate 28mtpa of LNG throughput. Bintulu Port has, onaverage, handled about 23mtpa of LNG over the past five years. We are expectingthroughput to be flat over the next few years as it is already operating atalmost full capacity.

' We are not changing our estimates as the new LNG Train 9 wouldonly start operations in 4Q2015, which is beyond our forecast horizon.Nonetheless, we estimate the additional 3.6mtpa throughput will bring inadditional RM35mil (accounting 8% of FY10 revenue) in revenue ' via berthcharges ' and circa RM10mil in pre-tax profit to Bintulu Port. Also, the impactto our DCF valuation will only be minimal, an increase of only 4%.

' That aside, we believe the interest on the company would bepremised on its expected 'monopoly' on SCORE's logistics requirement viaSamalaju Port. The federal government has recently approved RM500mil to fundthe maiden phase of the new port. 

Source: Amesecurities