By A. Stephanie
Kenanga Research today upgraded its call on NCB Holdings Bhd to “market perform” from “underperform” previously, its target price for the counter also revised upwards to RM3.04 from RM2.82.
Yesterday, NCB – which is the parent company of Northport and Kontena Nasional – posted net profit of of RM11.6 million for 1Q15, up 144.4% from the previous corresponding quarter. Kenanga said, “This beat expectations by accounting for 107% and 46.9% of our in-house and consensus forecasts, respectively.”
Year-on-year however, revenue for the quarter declined 3.7% to RM198 million, mainly due to the lower revenue contribution from the logistics division (down 19.6%), which was dragged down by the lower volume in government and oil and gas business, the research house noted.
Its analyst remarked: “Meanwhile, port operation revenue grew 4% thanks to higher throughput volume (rising 12.4%). As a result, total profit before tax (PBT) doubled to RM18.1 million driven by the higher profit contribution from port operations (up 53.9%).
“This in turn was due to lower operating expenses at ports division which NCB has attributed to lower fuel cost and lower repair and maintenance costs.”
The research house has subsequently upgraded its earnings forecast on the counter by imputing higher throughput growth of 4.4% for 2015 and 6.7% for 2016 (from 3% and 5%) while also factoring in lower operating expenses for the port operation division.
As a result, the house’s forecasted FY15 and FY16 net profits for NCB are now up to RM36.6 million and RM45 million respectively, from RM5.6 million and RM28.4 million previously.
Looking ahead, Kenanga said NCB’s throughput growth numbers were encouraging and better-than-expected after the recent completion of Wharf 16. It noted that the next phase of facilities upgrading is expected to start in 2Q15 with the upgrading of Wharf 8, which together with Wharf 8A will enable the group to attract larger shipping lines by catering to larger ships.
“Meanwhile, 1Q15 utilization rate for logistics operations has improved to 70% from 50% in the previous quarter. Nonetheless, the division is in still in the process of rationalising in order to return to profitability. We conservatively expect the division to break even by FY16,” Kenanga’s analyst remarked.
As at 11am today, NCB’s stock on Bursa Malaysia was trading at RM2.87, up 1.77% or five sen from its previous closing price of RM2.82.
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