[RAM] RAM Ratings reaffirms Bintulu Port's AA1 rating

RAM Ratings has reaffirmed the AA1/Stable/P1 corporate credit ratings of Bintulu Port Holdings Berhad (BPHB or the Group). The reaffirmation is premised on BPHB’s healthy financial performance, along with the solid 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 development of the Sarawak Corridor of Renewable Energy (SCORE). 

Bintulu Port Sdn Bhd (BPSB, a wholly owned subsidiary of BPHB) – via Bintulu Port - operates Malaysia’s sole LNG export terminal, which serves the LNG liquefaction plants of Petroliam Nasional Berhad (Petronas). Samalaju Industrial Port (Samalaju Port) - owned by Samalaju Industrial Port Sdn Bhd (another wholly owned subsidiary of BPHB) - commenced operations in June 2017 and functions as a logistical hub for the import of raw materials and the export of finished products from heavy and energy-intensive industries based in 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 2030.

The Group’s overall cargo throughput fell 6.2% in 2018 amid lower export volumes of LNG, palm oil, fertilisers and palm kernels. Following the one-off LNG supply disruption from January to August 2018, the volume of LNG handled by Bintulu Port shrank 12.7% to 23.68 mil tonnes last year. Subsequent to an overhaul in August 2018, there has been a gradual improvement in LNG cargo volumes. That said, BPHB only expects the pipeline to be restored to full capacity in 4Q 2019. We have conservatively assumed that the average growth of LNG cargo at Bintulu Port will stay within single digits. 

In 1H FY Dec 2019, the Group’s throughput rebounded 6.7% y-o-y (annualised) to 22.30 mil tonnes. While BPHB’s non-LNG cargo growth stayed flattish in 1H FY Dec 2019, container throughput increased. This is attributable to the increasing containerisation of timber and fertiliser products as well as more 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. Samalaju Port’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 in SIP are vulnerable to global downturns, this risk is somewhat moderated as its customers continue to invest significantly while revamping and expanding their facilities in the Park amid attractive investment incentives.  

As at end-June 2019, BPHB’s respective adjusted gearing and funds from operations debt coverage (FFODC) ratios stood at 1.24 and 0.25 times against RM1.28 bil of adjusted debts. After factoring in new tariffs for Bintulu Port (to take effect in 2020) and the requisite capex funding for BPSB and SIPSB, we expect the Group’s adjusted gearing and FFODC ratios to improve to respective averages of 1.21 and 0.27 times between fiscal 2019 and 2023 (base case: 1.02 and 0.32 times). 

Notably, the Bintulu Port Privatisation Agreement (PA) between BPSB, Bintulu Port Authority (BPA) and the GoM 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 30 years, at the discretion of the BPA. The risk of non-renewal of the licence is minimal as the Government has given approval in principle for the consideration of its renewal, subject to terms and conditions to be further negotiated and agreed upon. 


Analytical contact
Chu Jia Ying
(603) 3385 2519
jiaying@ram.com.my

Media contact
Padthma Subbiah
(603) 3385 2577
padthma@ram.com.my