State takeover could hasten tariff hikes for Bintulu Port
With Sarawak state’s takeover of the Bintulu Port Authority (BPA), analysts believe that this could hasten Bintulu Port Holdings Bhd’s (Bintulu Port) tariff hikes and subsequently, its earnings growth.
Following a recent engagement with Bintulu Port, the research team at Kenanga Investment Bank Bhd (Kenanga Research) said it came away feeling optimistic about the port operator’s prospects.
It noted that Bintulu Port appeared more upbeat on the prospects of Bintulu Port’s tariff hikes. This follows Sarawak state’s plan to take over the BPA.
The research team also noted that the takeover could be completed as soon as June 2024, paving the way for a possible 10 per cent hike in Bintulu Port’s tariffs by FY25.
“We expect a potential stepup in earnings if Bintulu Port is granted a significant hike in its port tariffs.
Currently, Bintulu Port operates under an interim lease agreement until December 2024,” it said.
It also highlighted that the Sarawak state has its own development master plan for all ports in Sarawak, with the key focus being on enhancing shipping connectivity with other major global transportation and logistics hubs.
Recall, there has not been any revision to Bintulu Port’s tariffs since 1993.
Currently, it said, Bintulu Port’s container tariff is 38 per cent lower than that of Samalaju Industrial Port.
“It currently charges RM207.50 per twenty-foot equivalent unit (TEU) for local containers, compared wigth RM335 per TEU charged by Samalaju Industrial Port,” it said.
Aside from that possible tariff rate revision, Kenanga Research pointed out that Bintulu Port stands to benefit from the development of two large-scale, green-energy plants in Bintulu.
“Sarawak state’s investment in two large-scale hydrogen plants in Bintulu, namely, H2biscus and H2ornbill, pursuant to its hydrogen economy agenda, will produce green energy cargoes to Bintulu Port such as green hydrocarbon, ammonia & methanol as well as blue ammonia.
“In addition, Bintulu Port will also handle biomass fuels produced in the hinterland.
“In the meantime, it will benefit from the handling of construction materials for the hydrogen plants,” it said.
There has also been talks on the potential resumption of Malaysia-South Korea free trade agreement covering digital economy, green economy and supply chain and this could potentially benefit Bintulu Port as South Korea is one of the largest importers of Malaysian LNG via Bintulu Port.
Kenanga Research noted that currently, Bintulu port has set itself a target of 10 per cent of total revenue coming from the handling of green energy by 2028, with the balance from LNG (40 per cent) and non-LNG (50 per cent). At present, its revenue mix is 50:50 LNG and non-LNG.
It expected the LNG cargo throughput at Bintulu Port to remain stable as sustained demand from Japan and South Korea will more than cushion the slowdown in demand from China.
There has also been a pickup in inbound and outbound cargo volumes at Samalaju Industrial Port from its key customers (Press Metal and OMH) despite the weak China’s economy.
“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 have 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,” Kenanga Research added.
All in, the research team said it continued to favour 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.
As such, it maintained its ‘market perform’ rating on the stock.