NORTHPORT (MALAYSIA) BHD - 2023 |
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| Report ID | 60538900469575 | Popularity | 226 views 75 downloads | |||||
| Report Date | Oct 2023 | Product | ||||||
| Company / Issuer | Northport (Malaysia) Bhd | Sector | Infrastructure & Utilities - Port/Airport | |||||
| Price (RM) |
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| Rationale |
Rating action MARC Ratings has affirmed its rating of AAIS on Northport (Malaysia) Bhd’s RM1.5 billion Sukuk Musharakah Programme with a stable outlook. The outstanding under the programme is RM350 million as at end-August 2023. Rationale Northport’s well-established operational track record as a key port operator in Port Klang, healthy cash flow generation and strong balance sheet profile remain key rating drivers. The rating is mainly moderated by the susceptibility of its handling volumes on global trade flows. Northport handles conventional cargo services and container services through its two main terminals, North Port and Southpoint; it has also established an automotive terminal and a biomass hub. The handling volume for conventional cargo services remained stable at around 5.5 million freight weight tonnes (FWT) in 1H2023. Container services, which has historically contributed to two-thirds of revenue, is dependent on economic activities. For 1H2023, container handling volume declined by 6.5% y-o-y to 1.5 million twenty-foot equivalent units (TEUs) as the high volume in the preceding corresponding period reflected the easing of pandemic restrictions; current throughput reflects handling volume reverting to pre-pandemic levels. Accordingly, Northport recorded a 11.5% y-o-y decline in revenue to RM379.4 million and 44.9% y-o-y decline in pre-tax profit to RM58.2 million. Operating profit margin remained steady at 30.2% (five-year average: 29.9%). To improve its port operating efficiencies, the group is investing in new port equipment. Total planned capex through 2025 will amount to about RM500 million and is expected to be funded through a combination of internal funds and external borrowings. Northport had indicated its intention to draw down RM150 million under the rated programme in 1Q2024. The company will also make further issuance in 2024 to refinance the RM350 million sukuk maturing in December 2024. Liquidity position remains healthy with cash balance of RM282.3 million as at end-June 2023. MARC Ratings notes that Northport has maintained a well-balanced capital structure with total borrowings of RM350 million (comprising the rated sukuk), translating to finance-to-equity (FER) ratio of 0.38x as at end-June 2023. MARC Ratings expects the company to maintain a balance between funding its operational and financial requirements and distributing dividends. Rating outlook The stable outlook reflects the rating agency’s expectation that Northport would broadly maintain its credit metrics that are commensurate with the rating band. Rating trajectory Upside scenario MARC Ratings does not envisage any upside to the rating and/or outlook over the next 12 months. Any upward movement in the rating and/or outlook on a longer term would consider sustained earnings performance, cash flow and debt metrics. Downside scenario The rating and/or outlook could come under pressure if Northport’s financial performance deteriorates sharply and/or if borrowings substantially increase, leading to a weakening balance sheet, in particular if gross leverage weakens to above 0.8x without definitive plans to improve its leverage position. Key strengths
Key risk
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