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Bintulu Port’s 9M16 net profit well within expectations

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Dry Bulk,

Bintulu Port Holdings Bhd’s (Bintulu Port) first nine months of 2016 (9M16) net profit was well within the expectations of the research arm of Kenanga Investment Bank Bhd (Kenanga Research).

As per the group’s latest financial statement on Bursa Malaysia, for the cumulative quarter ending 30 September 2016, Bintulu Port’s net profit for the period amounted to RM106.68 million, up from RM85.53 million in the preceding year corresponding nine months.

According to Kenanga Research, Bintulu Port’s 9M16 net profit came in well within its and consensus expectations at 77% and 75%, respectively.

A third single-tier interim dividend of six sen was declared, bringing 9M16 dividend per share (DPS) to 18 sen, which was in line with the research arm’s financial year 2016 estimate (FY16E) of 24 sen (3.8% yield).

Kenanga Research noted that going forward, the handling of liquefied natural gas (LNG) vessel calls and cargoes is still expected to be the largest revenue contributor for the group, backed by palm oil, container, bulk fertilizer and alumina cargoes.

“Phase 1 of Samalaju Port is expected to be completed by 2Q17, but throughput contribution is not expected to be significant in the near term,” the research arm said. “Bintulu Port’s longer-term prospect hinges on Samalaju as it will potentially stimulate the economic activities in Sarawak on the back of the Sarawak Corridor of Renewable Energy (SCORE) initiative.”

As such, the research arm made no changes to its FY16-17E earnings of RM138.2 million to RM145 million.

All in, Kenanga Research maintained ‘market perform’ but lower target price to RM6.72 per share from RM7.22 per share previously.

Kenanga Research’s dividend discount model (DDM)-derived target price was lowered after adjusting for a higher 10-year Malaysian Government Securities (MGS) of 4% (from 3.6%) closer to current levels post the MGS spike last week, and was based on a discount rate of 5%.

The research arm’s target price implied a 22.4-fold price earnings ratio (PER) FY16E earnings, which was on par with Westports Holdings Bhd’s FY16E price earnings ratio (PER) of 22.9-fold, while the stock is also lacking strong near-term catalyst at this juncture.

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