NCB Holdings Bhd
(April 22, RM2.75)
Maintain buy and a target price of RM3: In the first quarter of financial year ending Dec 31, 2015 (1QFY15), container throughput at Northport staged a strong recovery with a growth rate of 12% year-on-year (y-o-y) , flattish quarter-on-quarter (q-o-q), indicating capacity utilisation of 49% ( 1QFY14: 44%). While local volume declined 2% y-o-y, the trans-shipment boxes jumped 30% y-o-y, largely due to Singapore-based Pacific International Lines Ltd’s relocation of empty boxes to Northport, from Port of Singapore Authority (PSA), for storage/maintenance purposes. At the logistics division, NCB Holdings has managed to contain costs and expects losses (FY14: RM53 million pre-tax loss) to narrow in FY15. Elsewhere, 1QFY15 results are expected to be released by April 29.
Based on the stronger throughput and lower losses at its logistics division, we expect NCB Holdings to post a stronger y-o-y and q-o-q net profit for 1QFY15 (1QFY14: RM5 million, 4QFY14: RM9 million).
We raise our FY15 to FY17 net profit forecasts to RM43 million, RM53 million and RM65 million (from RM15 million, RM26 million and RM46 million) as we raise our throughput growth assumption to 8% for FY15 (from 5%) and assume the logistics’ losses to be halved in FY15.
We continue to like the Port Klang operators; both Westports and Northport have shown their ability in growing their volumes (1QFY15: increased by 12% to 17% y-o-y) without stealing each other’s customers. Compared with PSA’s volume growth of just 2% y-o-y in 1QFY15, we believe the Port Klang operators have eaten into the market share of PSA.
Meanwhile, key potential catalysts in the near to medium term include: (i) rebound in earnings; (ii) port tariff hikes of 20% to 30%; and (iii) injection of Port of Tanjung Pelepas, Johor Port and Penang Port from Tan Sri Syed Mokhtar Al-Bukhary/MMC Corp Bhd. — Maybank IB Research, Apr 22
This article first appeared in The Edge Financial Daily, on April 23, 2015.