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NCB’s gateway business gives it an edge

Thursday, 03 September 2015 | 10:00
Northport (M) Bhd, the wholly owned port subsidiary of NCB Holdings Bhd, is crucial in enhancing the port business of MMC Corp Bhd should it decide to list the division.

This could be the main reason why MMC has been increasing its interest in NCB and prepared to pay a premium price for the port operator since December last year.

MMC already has in its stable 100% of Johor Port in Pasir Gudang and 70% of the Port of Tanjung Pelepas (PTP) – both located in Johor. The remaining 30% in PTP is owned by APM Terminal, a port-operating arm within the Maersk Group.

Another port linked to MMC is Penang Port, which is owned by Seaport Terminal Sdn Bhd, a major shareholder in MMC.

“Among the four terminals, Northport is more appealing to investors, as it enjoys higher margins supported by its dominance and pioneer status in handling the import and export business, or better known as gateway containers, in Port Klang.

“The margins for handling gateway containers are better compared with handling transhipment boxes. Typically, the margins for transhipment is half of what is achieved by gateway containers,” said an executive of a shipping company.

The executive said it was not easy to narrow the gap between the transhipment and gateway port operators.

“Malaysian ports that handle gateway boxes could on average earn close to a 20% net margin,” a source told StarBiz.

The healthy margins are indicated based on NCB’s results.

In 2014, Northport handled 2.57 million twenty-foot equivalent units (TEUs) and posted an RM83.2mil profit after tax in the financial year ended Dec 31.

Northport’s gateway boxes stood at 56%, while the remaining 44% belonged to transhipment for the year.

PTP, which generally is a transhipment port, handled a bigger volume of 8.5 million TEUs in the financial year ended June 30, 2014, recording RM105mil in pre-tax profit.

At last year’s International Association of Ports and Harbours conference in Sydney, a prominent shipping consultant said that the typical earnings before interest, taxes, depreciation and amortisation margins for gateway ports and transhipment ports were at 40% and 20%, respectively. It predicted that this would not change significantly even till 2020.

However, the major advantage of PTP is that it has more berthing facilities for ultra-sized ships of 18,000 TEUs, while Northport is still working on expanding capacity.

Johor Port’s operations are similar to Northport but smaller in volume, even though it has the Pasir Gudang hinterland cargo. Also, it faces competition from Singapore.

Meanwhile, sources said that the management of NCB is focused on improving operations and not distracted by the emergence of MMC as a major shareholder.

“They are still pursuing the synergistic cooperation that could be derived with businesses under the MMC group,” said a source.

Although NCB doubled its earnings in the first half of 2015 to RM18.6mil on lower revenue, management feels there is still a lot of space to optimise cost, assets and people.

MMC now owns about 30% of NCB, while Permodalan Nasional Bhd, its long-term shareholder since its establishment, is still holding on to its close to 48% stake.

This has prompted a public spread shareholding issue, which the board is currently tackling.
Source: The Star Malaysia
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