Stock Name: BIPORT
Company Name: BINTULU PORT HOLDINGS BHD
Company Name: BINTULU PORT HOLDINGS BHD
| Research House: OSK | Price Call: HOLD | Target Price: 7.10 |
Bintulu's FY11 earnings may have come in within our andconsensus forecasts, but we wish to point out that the company has made severalrestatements of its accounts to comply with several new accounting rules. Whilerevenue was higher as expected given the higher LNG cargo volume generated,margins shrank some 40bps as the non cargo business incurred higher operationcosts as its volume has yet to reach the level at which it can achieveeconomies of scale. We maintain our earnings and NEUTRAL call, with a higher FVof RM7.10.
Incorporating new accounting standards. Due to the adoption of new accounting standards,there is no q-o-q earnings comparison given that the company had to restate itsconcession-related assets although we reckon that its earnings are deemed inline. Bintulu Port's 4QFY11 revenue grew 6.17% y-o-y on higher non LNG cargorevenue as we expected, as the company added container capacity. For the fullyear, operating revenue grew 6%, in line with our expectations.
Margins take the cut.Due to the growing revenue from non LNG cargo for which the margins are not aslucrative as those for LNG, Bintulu Port saw margins contract by an estimated40bps, as higher staff and operational maintenance costs also took a bite. We seethis as the trend moving forward until it achieves economies of scale uponhitting a higher volume handled.
Waiting for Samalaju. Management has yet to finalize the long-drawnongoing discussions to operate Samalaju Port and its ownership structure,Currently, it has yet to determine the funding for this venture, butindications point to possible fund raising through the debt market. As of now,negotiations for lower lease rental as well as lower berthing tariff hike forits LNG tankers are still pending.
Dividends. Bintulu Port announced a final dividend of 15sen (marginally above our estimates), bringing the full year dividends to 37.5sen (unchanged from 2010), representing a total net yield of 5.3%.
Maintain NEUTRAL. We maintain our earnings forecast for now,pending full understanding of the new accounting standards. Nonetheless, ourDCF based valuation remains unchanged as it captures cash flow. As we roll overour DCF, our FV is adjusted upwards to RM7.10. Maintain NEUTRAL, although we like the stock for its stableyield.
Source: OSK188
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