Tuesday, March 4, 2014

NCB - sharp earning recovery in 2014

Logistics provider and port operator NCB could see a much needed boost from its new wharf, which came on stream in Dec 2013.

The new capacity could be a bright spot for the group, which saw tough times in 2013 with its loss making logistics unit, Kontena Nasional Bhd.

The new capacity selling point is that the port will be able to accommodate larger vessels with drafts of up to 17m, from 12m previously.

While this offers room for growth for NCB, industry observers caution that it still has a strong competitor in Westports Holdings Bhd.

This may raise eyebrows of new and prospective clients because Northport now (Feb 2014) has a new wharf and bigger handling capacity but there is no room for error. At it is competing with Westports, it has establish that it can just as efficient.

NCB is banking on recovery in exports. It is not yet clear if the company will be able to see outstanding growth because it comes down to whether clients choose it over Westports.

NCB has an element of uncertainty due to the restructuring of Kontena Nasional, and also because investors cannot tell whether morel losses will be incurred in future.

In May 2013, there were claims that Kontena Nasional sufferd a rm19.2 million loss for FY2012 ended Dec 31. It also made a pre tax loss of rm72.8 million for FY2013.

Currently (Feb 2014), NCB is trading at FY2014 PER of 11 times, a substantial discount to its peers. Investors expecting a sharp earnings recovery in FY2014, NCB is valued at a low PE-to-growth multiple of only 0.2 times compared with its small peers Integrax Bhd’s 1.9 tiems and Suria Capital’s 2.5 tiems.

What would be a re rating catalysts for the stock is if NCB’s parent company, PNB takes up a larger block in NCB. It could make a private placement to PNB.

PMB has a controlling shareholding stake of 47.71% in the company. The other major shareholder are MISC Bhd (15.73%) and Retirement Fund Inc (9.13%).

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