KUCHING: NCB Holdings Bhd’s (NCB) first quarter of 2015 (1Q15) net profit of RM11.6 million was above analysts’ expectations, mainly due to impressive container throughput growth.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), it believed that the growth in throughput volume could be from their Singaporean customer, PIL who shifted some of their containers to Northport to enjoy lower tariffs in Port Klang compared to PSA.
MIDF Research noted that the double digit growth is a pleasant sight as compared to the lacklustre 19.1 per cent year-on-year (y-o-y) decline seen as recent as the second quarter of 2014 (2Q14).
The research arm observed that the contribution of port operations to total turnover had risen to 72.7 per cent (from 67.3 per cent in 1Q14) which bodes well for NCB as the segment yields profit before tax (PBT) margins of 19.4 per cent.
For 1Q15, MIDF Research noted that Kontena Nasional saw a decrease in revenue of 19.6 per cent y-o-y in line with their efforts to exit loss-making businesses such as cross-border transactions.
“However, the unit still registered a loss, albeit at a decreased amount as the Oil and Gas businesses remain uninspiring,” it said.
The research arm further noted that the logistics arm had made some changes to its top management earlier in the year, coupled with several initiatives put in place, management is targeting for the unit to break-even by mid-2016.
Meanwhile, MIDF Research noted that both the port and logistics operations saw operating expenses declined 2.4 and 16.9 per cent respectively as a result of lower fuel cost (diesel), repair and maintenance cost and outsourcing services.
In addition, the research arm noticed that short-term borrowings had decreased by RM106 million, with a cash inflow of RM85.6 million being a grant by the government.
“This has helped bring down finance cost by 31.2 per cent,” it added.
The research arm of Maybank Investment Bank Bhd (Maybank IB Research) noted that the grant is a form of government’s support, in view of the group’s various port developments.
Maybank IB Research has estimated that NCB’s capital expenditure (capex) could be around RM300 million in financial year 2015 (FY15).
The research arm continued to like the earnings recovery story of NCB and believe that the present management is more hands-on in managing its two businesses.
“It is worth noting that management targets to turn around its logistics division by mid-2016, considering the high pretax loss of RM57 million in FY14,” it said.
The research arm added that stock remained a ‘buy’ for its brighter prospects and the potential handling tariff hikes.
In contrast, MIDF Research raised its earnings forecast for FY15 upwards by 18.1 per cent to RM36.5 million from RM30.9 million previously taking into account higher throughput growth of seven per cent from: six per cent previously.
With the completion of upgrading works on Wharf 8A, the research arm noted that management will shift their focus to upgrading Wharf 8 (target completion: 2Q15), upgrading port equipment and deepening its draft to cater to larger ships and increasing productivity.
“It is also noteworthy that the dividend of five sen announced in 1QFY15 is the highest declared since back in 3QFY12’s seven sen,” it said.
MIDF Research has thus maintained its ‘neutral’ call on NCB.