Period

3Q15/9M15

Actual vs. Expectations

9M15 net profit of RM29.5m (+289.7%) was within our expectation by matching 75.8% of our in-house forecast but above consensus at 87.5% of the streets’ estimates. We think that consensus might have underestimated the growth in its port operations division.

Dividends

None, as expected.

Key Results Highlights

YoY, 9M15 revenue was flattish at RM608.6m as the growth in port operations (+8.3%) on the back of 10.4% growth in throughput volume was negated by the weakness in logistics division (-19.4%) which was in the midst of restructuring. PBT managed to climb 263.4% to RM46.9m owing to strong performance of ports operation division (+94.7%) on the back of healthy throughput growth and the lower operating costs due to the lower fuel costs. As a result, net profit surged 460.6% to RM29.5m.

QoQ, 3Q15 revenue grew 13.6% thanks to the growth in both operating divisions. PBT surged 44.3% to RM17.0m thanks to the encouraging performance in port operations (+13.6%) and further aided by the narrower LBT in logistics division as the Group’s initiative in turning the division around gained some traction. Net profit registered relatively higher growth of 55.6% to RM10.9m thanks to the lower effective tax rate of 36.1% (2Q15: 40.7%).

Outlook

Moving forward, we expect a challenging outlook for its logistics division due to the slowdown in oil & gas activities and infrastructure construction activities. Meanwhile, the port operations division is also expected to face headwinds in view of the uncertain and volatile global economy outlook.

Major shareholder, MMCCORP has extended a mandatory general offer (MGO) to the minority shareholders in order to privatise NCB with offer price of RM4.40. We advocate investors to accept the offer as we think the offer price is a good price for minority shareholders, which translates into FY16E PER of 37x, which is 41.2% higher than nearest its peer WPRTS’ valuation and PBV of 1.4x (above +1SD over 5-year mean). This deal offers the minority shareholders an opportunity to exit NCB, which is bracing for challenges in both port operations and logistics divisions.

Change to Forecasts

No changes to earnings forecasts.

Rating

Maintain ACCEPT OFFER

Valuation

Our Target Price of RM4.40 is kept, on par with the offer price from MMCCORP.

Risks

NA

Source: Kenanga Research - 29 Oct 2015