NCB ... Sep10

Cash-rich NCB Holdings Bhd, which has a comfortable cash reserve exceeding RM800 million with no borrowing, may declare a sizable dividend payout at year-end, although industry observers say the port operator is going to need all the cash it has.

Shipping analysts expect NCB to pay dividends of up to 70% of net profit for the financial year ending Dec 31, 2010. It has been paying dividends of above 60% of net profits over the last few years.

NCB operates both Northport and Southpoint in Malaysia’s National Load Centre, Port Klang.

In NCB, PNB has a 44.53% stake through the unit trust scheme. NCB’s other major shareholders include MISC Bhd with 15.73% and the Port Klang Authority (PKA) with 5.32%.

If (the dividend payout) happens, NCB’s free cash flow position will be negative next year, especially if it decides to go ahead with its RM300 million capital expenditure exercise for a new berth.

NCB’s intention of adding capacity was postponed due to the economic downturn, although the plans have since been put back on the table, to convert its current liquid bulk terminal to a multipurpose terminal and to redevelop one of its break bulk terminals into a container terminal with a depth of 17 metres.

As at June 30, 2010, NCB had RM823.7 million in net cash, which is equivalent to a significant RM1.75 per share.

NCB had earlier acquired the 21-year licence from PKA during the privatisation of Klang Container Terminal (KCT) and Klang Port Management (KPM) to form Northport. The assets were acquired at a total price of RM472 million in the form of goodwill payment for the issuance of the port licence, to be amortised on a straight line over the 21-year lease period.

KCT has fully amortised its goodwill, leaving behind KPM, which currently amortises RM17.35 million annually until 2013. Also, under the agreement the group will be committed to pay annual lease charges, which will gradually increase up to 10% cumulatively over every three years.

Despite this, management had not given any clear guidance on what the terms and conditions of the agreement would be upon the lease renewal, and that negotiations were believed to begin only in early 2012.

For the second quarter ended June 30, 2010, NCB posted a 23% rise in net profit to RM35.51 million, or 7.6 sen per share, on revenue of RM227.84 million. In 2QFY09, it posted a net profit of RM28.86 million on the back of RM200.75 million revenue.

For the cumulative six months, NCB’s net profit was up 30% to RM76.34 million, or 16.2 sen per share, from RM58.73 million a year earlier, while revenue was 12.5% higher to RM437.1 million from RM388.52 million previously.

Its net assets per share at the end of the quarter stood at RM3.95.