Published on 30 Jan 2019.
RAM Ratings has reaffirmed the AA1/Stable/P1 corporate credit ratings of Bintulu Port Holdings Berhad (BPHB or the Group). The reaffirmation of the ratings is premised on BPHB’s healthy financial performance, along with continued strong support that the Group enjoys from both the federal and state governments. BPHB operates Malaysia’s only export terminal for liquefied natural gas (LNG) and plays a pivotal role in the Sarawak Corridor of Renewable Energy (SCORE).
Bintulu Port, via Bintulu Port Sdn Bhd (BPSB, a wholly owned subsidiary of BPHB), operates the nation’s sole LNG export terminal, which serves the LNG liquefaction plants of Petroliam Nasional Berhad (Petronas). Samalaju Industrial Port (Samalaju Port), via Samalaju Industrial Port Sdn Bhd (another wholly owned subsidiary of BPHB), which commenced operations in June 2017, functions as a logistical hub for the import of raw materials and the export of finished products from heavy and energy-intensive industries at Samalaju Industrial Park (SIP or the Park). SIP represents part of the SCORE’s agenda of developing and transforming Sarawak into a developed state by 2020.
The Group’s overall cargo throughput fell 12.3% y-o-y in 9M FY Dec 2018 amid lower export volumes of LNG, palm oil, fertilisers and palm kernels. During the period, the volume of LNG handled by Bintulu Port dropped 16.2% y-o-y to 16.74 million tonnes (9M FY Dec 2017: 19.98 million tonnes) due to disrupted supply from the Sabah Oil and Gas terminal to the Petronas LNG Complex in January 2018. Despite all this, LNG remains the primary cargo item handled at Bintulu Port. BPHB expects the pipeline to be restored to its full operational capacity by mid-2019. As such, we expect LNG throughput to decrease 18% y-o-y in fiscal 2018. Thereafter, we have conservatively assumed that the average growth volume for LNG at Bintulu Port will stay in the single-digit realm.
BPHB’s non-LNG cargo declined 6.9% y-o-y in 9M FY Dec 2018, largely due to the handling of a lower volume of oil palm-related cargo. Meanwhile, container throughput jumped 14.9% to 260,242 TEUs in 9M FY Dec 2018 due to increasing containerisation of timber and fertiliser products as well as higher exports of finished goods produced by SIP-based companies. Moving forward, we expect cargo throughput growth to mainly stem from the handling of bulk cargo at Samalaju Port, as SIP’s customers increase their exports; the former’s revenue contribution is also anticipated to lift the Group’s top line as its gazetted tariffs are higher than those of Bintulu Port. While the heavy industries within the Park are vulnerable to global economic downturns, this risk is partly mitigated by the more stable demand for LNG, which provide BPHB a steady stream of earnings.
As at end-September 2018, BPHB registered respective adjusted gearing and adjusted funds from operations debt coverage (FFODC) ratios of 1.34 and 0.20 times against a total adjusted debt load of RM1.61 billion. After factoring in new tariffs for Bintulu Port effective 2019 and the requisite funding for the future capex of BPSB and SIPSB, we expect the Group’s adjusted gearing and FFODC ratios to weaken further to respective averages of 2.06 and 0.17 times between fiscal 2019 and 2022 (base case: 1.82 and 0.20 times).
Notably, the Bintulu Port Privatisation Agreement (PA) is co-terminus with Bintulu Port’s operating licence, which is due to expire on 31 December 2022. The PA gives BPSB the option to extend the tenure of Bintulu Port’s operations for about 30 years, at the discretion of the Bintulu Port Authority. The risk of non-renewal of the licence is minimal, given that the Government has extended its approval in principle for the consideration of a renewal, subject to terms and conditions to be further negotiated and agreed upon.
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Ratings on Bintulu Port Holdings Berhad