MARC Ratings has affirmed its AAIS rating on Northport (Malaysia) Bhd’s RM1.5 billion Sukuk Musharakah Programme with a stable outlook.
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 to global trade flows.
Northport handles conventional cargo and container services through its two main terminals, Southpoint and North Port. The handling volume for conventional cargo services remains stable at about 5.5 million freight weight tonnes in 1H2023. Container services, which have 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 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 lower revenue of RM379.4 million and pre-tax profit of RM58.2 million (1H2022: RM428.5 million; RM105.6 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 borrowings. Northport had indicated its intention to drawdown RM150 million under the rated programme in 1Q2024. Liquidity position remains healthy with cash balance of RM282.3 million as at end-June 2023.
MARC Ratings notes that Northport has maintained a balanced capital structure with total borrowings of RM350 million (comprising the rated sukuk), translating to a finance-to-equity 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.