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Posted Date: November 24, 2021

MARC has affirmed its MARC-1IS and AA-IS ratings on Northport (Malaysia) Bhd's (Northport) Islamic Commercial Papers (ICP) Programme and Islamic Medium-Term Notes (IMTN) Programme. The ratings outlook has been revised to positive.

The outlook revision incorporates the continued improvement in Northport's credit metrics on the back of substantial growth in its throughput volume. Its stable group borrowing levels and strong liquidity position have also translated to a stronger credit profile. The rating would be upgraded over the next 12-18 months if Northport sustains its earnings growth while maintaining a debt-to-equity ratio of about 0.5x and a cash flow from operations debt coverage of more than 0.5x.

The ratings affirmation is driven by Northport's established position in providing container and conventional cargo handling services through its two main terminals North Port and Southpoint in Port Klang as well as its healthy cash flow generation, underpinned by an accommodative tariff structure under long-term concessions expiring in November 2043.

During 1H2021, Northport recorded higher throughput volume for both container and conventional cargo services which rose by 43.1% y-o-y to 1.7 million twenty-foot equivalent units (TEUs) and 29.8% y-o-y to 5.0 million freight weight tonnes (FWT). The higher throughput volume led to a 40.4% y-o-y increase in revenue to RM420.0 million during the period. Overall operating profit margin stood stronger at 39.6% (1H2020: 23.7%), supported by improved pricing structure and operational efficiency. Its container handling volume growth was mainly driven by commencement of new intra-Asia services. Conventional cargo operations have benefited from higher handling volume for palm oil, grain, iron, and steel products. Finance-to-equity ratio improved to 0.53x (1H2020: 0.60x). Outstanding under the rated programmes remained at RM450 million as at end-October 2021. Northport's moderate capex plan totalling RM46.0 million and RM330.7 million in 2H2021 and 2022 is expected to be funded internally.

Contacts:
Umar Abdul Aziz, +603-2717 2962/ umar@marc.com.my;
Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my;
Taufiq Kamal, +603-2717 2951/ taufiq@marc.com.my.

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