Benalec gains 1.85% for progress in oil storage hub project

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KUALA LUMPUR (Apr 15): Benalec Holdings Bhd rose as much as 1.5 sen or 1.85% to 82.5 sen after the company had engaged with Pestech International to build power supply infrastructure for its Tanjung Piai Integrated Petroleum and Maritime Industrial Park (TPIPMIP) in Johor.

Benalec (fundamental: 1.15; valuation: 0.6) rose to a high of 83 sen but finally settled at 82.5 sen as at 10.53am. A total of 1.91 million shares changed hand.

It had announced yesterday that the parties will begin discussions to form a definitive contract within six months from the signing of the memorandum of understanding.

Benalec specialises in marine construction services including land reclamation and contruction of marine infrastructure.

In a note to its client today, Am Research had maintained a “buy” recommendation on Benalec with an unchanged fair value of RM1.25 a share. This pegs the stock at a 45% discount to its sum-of-parts (SOP) value.

“We foresee this latest move as a measure of Benalec's commitment to develop its 3,485-acre Tg. Piai concession into a future oil storage hub via TPIPMIP.

“Apart from power, we expect the group to be in the midst of planning for other infrastructure requirements within the industrial park. This comes as the group had earlier submitted plans to raise RM200 million via convertible bonds,” the research firm said.

Am Research also expected initial works of between 100 acres to 200 acres at Tg. Piai to commence within the next few months.

“All in all, we believe the increased level of activities will improve the visibility of TPIPMIP when attracting major international oil storage players. However, as always, the real challenge will be finding trailblazing offtakers. Negotiations with 1MY Strategic Oil Terminal is expected to be concluded by June 11,” it added.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)