AmWatch - Bintulu Port : Timing of tariff restructuring overhang, 9 Oct 2015

STOCK FOCUS OF THE DAY

Bintulu Port : Timing of tariff restructuring overhang     Hold

We maintain HOLD on Bintulu Port (BiPort) with an unchanged fair value of RM7.16/share, which implies a PE of 23x FY15F EPS of 33.5 sen. BiPort’s proposed tariff restructuring, including a 30% hike for non-LNG cargoes at Bintulu Port and a reduction of LNG-tariffs, may not likely be implemented by early next year, as we have anticipated. The group is still awaiting the authorities’ decision on the matter.  We maintain our forecasts for now, pending a clearer picture of the tariff restructuring. The risk bias on our fair value is on the downside. We believe the current share price has priced in the potential delays. BiPort is asking for tariff hikes of 20%-30% in containerised and general cargo handling for Bintulu Port. The tariffs for the new port, Samalaju Port, have also yet to be finalised. Simultaneously, LNG-tariffs will be reduced.

Samalaju Port, which can handle 18mil tonnes of cargo, was originally scheduled for completion by next year, but the latest media report suggests that completion has been delayed to 3Q17. Furthermore, our assumption of an additional 2.5mil tonnes of LNG in FY16F may not be achieved given that the new Train 9 at the Bintulu MLNG complex is likely only to be completed by 3Q16, instead of early 2016. The jetty has yet to be constructed. Train 9 will bring in an additional 3.6mil tonnes of LNG, annually. On a positive note, BiPort has already succeeding in getting a RM300mil reduction in land lease rentals at Bintulu Port over the original concession period to 2022. It has also earlier been granted an approval in-principle from the federal government to extend the concession period for Bintulu Port to 2052 from 2022. This means asset depreciation could be stretched over a long period. Our current numbers reflect a reduction in LNG tariff rates that would be more than offset by increases in the non-LNG cargo rates and the reduction in lease rentals. By FY16F, we have assumed an at least 15% decline in LNG tariff, but mitigated by a 43% rise in non-LNG tariffs vs. FY13 numbers. We maintain that for now.

               

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