By G. Sharmila
Analysts say Bintulu Port Holdings Bhd, a Petronas associate company and Sarawak state-linked port services operator, is expected to clock in decent earnings for FY15 and FY16 with the full completion of Samalaju Port and the gradual reduction in capital expenditure. But is “decent” enough for the discerning investor?
Business model: According to Bursamarketplace.com, Bintulu Port Holdings Bhd provides port services at the Bintulu Port in Bintulu, Sarawak. The company was incorporated in 1996 and is based in Bintulu. The company operates in two segments – port operations and bulking services.
The port operations segment provides port services and construction services, which comprise construction of port facilities, handling of cargo for liquefied natural gas (LNG), petroleum products, liquefied petroleum gas, general cargo, container, dry bulk cargo, and other ancillary services.
The bulking services segment provides bulking installation facilities for palm oils, edible oils, vegetable oils, fats, and its by-products. The company also provides marine services, such as pilotage, towage, and mooring services; shipper services; and auxiliary services, which include supply of fresh water, labour, bunkering, diving, security, stevedoring and handling, on dock maintenance and repairs, and cargo gears hiring services.
In addition, Bintulu Port Holdings is also developing the Samalaju Port in Bintulu, which is slated for completion in 2016.
BIMB Securities Research in a report dated July 2 pointed out that Bintulu Port is the only gateway for the country’s biggest revenue export earner, namely LNG.
“The port is well equipped with dedicated berths and is one of the few ports in the world that possess a vessel traffic surveillance system (VTS), which is crucial for monitoring, controlling, and navigating vessels safely,” the research house highlighted in its report.
It added that for 2014, Bintulu Port contributed RM17.6 billion of LNG products, or 2.3% of the country’s total LNG exports totalling RM766.13 billion that year. The company also has a concession that spans from 1993 from 2022 and has obtained the approval in-principle of the federal government to extend the concession period of Bintulu Port to 2052.
Shareholders and management: As at July 2, Bintulu Port Holdings’ major shareholders are Petronas with a 28.5% stake, the Sarawak state government (26.7%), and Equisar Asset Sdn Bhd (13%).
Heading the company is Mior Ahmad Baiti Mior Lub Ahmad, who was appointed the chief executive officer (CEO) of Bintulu Port Holdings Bhd on July 1, 2011. He is also the acting CEO for the company’s subsidiaries namely Bintulu Port Sdn Bhd, Biport Bulkers Sdn Bhd, and Samalaju Industrial Port Sdn Bhd.
Prior to his present appointment, he served as the CEO of Bintulu Port Sdn Bhd and was the acting CEO of Bintulu Port Holdings Bhd and Biport Bulkers Sdn Bhd, effective July 1, 2004 until June 30, 2011.
Mior Ahmad Baiti began his career at Bintulu Port Authority as a civil engineer in 1981 and later went on to join Bintulu Port Holdings, where in 1996, he was appointed as senior manager of the technical service division of the company.
Share performance: According to data from Bloomberg, the stock’s 52 week trading range is from RM6.57 to RM7.20, while its one-year share price return as at July 30 was -0.48%.
Reuters data showed that the stock has a beta coefficient of 0.07, which means that the stock’s trading volatility is below average. (A beta coefficient of 1 and above indicates above-average trading volatility.)
What analysts think: According to BIMB Securities in its July 2 report, Bintulu Port Holdings is expected to be a key beneficiary of the Sarawak Corridor of Renewable Energy (SCORE).
“Bintulu Port’s container growth is expected to be boosted by 3% to 5% each year from the increased activity in export and import of SCORE generated cargo,” the research house said.
It also highlighted that Samalaju Industrial Port is expected to be completed in the third quarter of 2016 and is targeted to handle six million tonnes of cargoes in its first year of operations with an estimated RM100 million in revenue. The concession period is from 2016 to 2056, with the option for another 20 years.
“We expect Bintulu Port to register decent earnings of RM150.9 million for financial year (FY15) and RM173.0 million for FY16 with the full completion of Samalaju Port coupled with the gradual reduction in capital expenditure. We estimate a dividend totalling 24.9 sen, or a yield of 3.6%, for FY15,” BIMB Securities said of the company.
However, it also noted that the prevailing slower global economic situation has affected the overall performance of Bintulu Port, which registered only marginal increase in the port’s operations in 2014.
BIMB Securities has valued Bintulu Port Holdings at RM6.56 based on its regional peers’ weighted price-earnings ratio of 20 times over FY15 earnings per share. It said that the stock does not offer much potential upside at the moment, hence its “hold” recommendation on the stock.
Earnings forecast:
StockStalk: When times are good, it is easy to be tempted to buy into a stock – easier than waiting on the sidelines for when the price of a “good stock” falls.
Looking at Bintulu Port Holdings’ one-year price chart and based on what BIMB Securities says, one may be tempted to rush into buying the stock. But KINIBIZ would like to remind the investor that Bintulu Port’s operations have been affected by the global economic situation and that the situation will likely persist for awhile yet.
Perhaps investors would do better for themselves if they waited for the completion of the Samalaju Port, which will likely add substantially to the company’s overall earnings. Also, the company’s projected dividend yield is so-so and not particularly attractive to short-term investors.
This is a stock more suited to the investor with a long-term view and patience to wait for the LNG port services operator to produce higher earnings and thus, dividends.
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Important Note and Disclaimer: This article should NOT be taken as a cue to either buy or sell the stock. The intention is to highlight the key factors you might want to think about before plunging in or scrambling out. While KINIBIZ makes every endeavour to ensure facts are right and opinion is fair, no liability can be assumed for anyone relying on this information. In other words let the buyer (or seller) beware — a reflection of Bursa Malaysia, we say.
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