Bintulu Port’s prospects positive from steady LNG cargoes income, potential hike in tariffs

KUCHING (Aug 26): Bintulu Port Holdings Bhd’s (Bintulu Port) prospects have been viewed favourably for its steady income stream from handling LNG cargoes for Malaysia LNG Sdn Bhd, and a potential step-up in earnings if granted a significant hike in its port tariffs, analysts observed.

In a report, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said: “We continue to like Bintulu Port for its steady income stream from handling LNG cargoes for Malaysia LNG Sdn Bhd (that typically makes up close to 50 per cent of its total profit), a potential step-up in earnings if Bintulu Port is granted a significant hike in its port tariffs, and the tremendous growth potential of Samalaju Industrial Port backed by rising investment in heavy industries in Samalaju Industrial Park.”

It pointed out that The LNG cargo throughput at Bintulu Port is expected to remain stable with sustained demand from Japan and South Korea and signs of green shoots of recovery from China.

There has also been a pick-up in inbound and outbound cargo volumes at Samalaju Industrial Port from its key customers.

“We believe its key customers have an edge over their peers in the international market as their products have low-carbon footprint given the hydro power input.

“Also, as it stands today, Western countries still imposed outstanding sanctions on Russian aluminium (that makes up circa six per cent of world aluminium production) and hence will have to look for alternative sources of aluminium supply.

“On the other hand, Bintulu Port will commence the handling of marine services for Sarawak Petchem’s methanol division from the 2HFY24,” it added.

As for the new Bintulu Port Authority Sarawak (BPAS) which is under the purview of Sarawak government, the research team noted that it is on track to be completed by year-end.

“Concurrently, Bintulu Port is under an interim lease agreement until Dec 2024 pending the completion of the handover of BPA control.

“Currently, the Bintulu Port (Dissolution) Bill 2024 has been passed by both House of Representatives and House of Senate before notification in Gazette.

“At the same time, the new Port Operation Agreement is being drafted. The operations of Bintulu Port operated by Bintulu Port will not be disrupted during the process of the Sarawak Government’s port authority takeover from the Federal Government,” it saidd.

Meanwhile, on the port operator’s recently released first half of the financial year 2024 (1HFY24) results, Kenanga Research said its 1HFY24 core net profit almost doubled y-o-y driven by strong cargo volumes and lower finance cost and tax.

Its LNG cargo volume inched up 3.4 per cent driven by stronger LNG demand from China, Japan and South Korea.

“On the other hand, its non-LNG segment (comprising dry bulk, break bulk, liquid bulk and containerised cargoes) rose 16.2 per cent driven by the recovery in plantation throughput (the import of fertilisers, the export of palm products) as well as higher inbound and outbound cargoes from heavy industries in Samalaju Industrial Park (i.e. the import of alumina, coal and coke, the export of aluminium and manganese),” the research team said.

All in, Kenanga Research maintained its ‘market perform’ rating on the stock.