MARC Ratings has affirmed its rating of AAIS 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 and healthy profitability remain key rating drivers. The rating is mainly moderated by concerns on global trade flows and higher capex requirements to further strengthen its operations.
Northport handles conventional cargo services and container services through two terminals, North Port and Southpoint. In 1H2024, for the conventional cargo segment, it recorded a 7.2% y-o-y growth to 5.9 million freight weight tonnes (FWTs) and for the container segment, a 14.7% y-o-y growth to 1.7 million twenty-foot equivalent units (TEUs). The strong performance of the container segment was largely due to ad-hoc calls made by liners which were diverted to Northport from other major ports due to schedule conflicts arising from the Red Sea crisis. Nonetheless, excluding ad-hoc calls, the container handling volume rose by 5.7% y-o-y to 1.6 million TEUs, above industry expectation of about 3%.
Given the higher handling volume, revenue and operating profit grew sharply by 25% y-o-y to RM475.9 million and 15% y-o-y to RM131.4 million in 1H2024. Northport’s cash flow metrics have remained strong with interest and debt coverage at 10.8x and 0.6x. The rating agency expects these ratios to remain sound as borrowings are projected to increase on a staggered basis up to RM720.0 million through 2027 from RM350.0 million, the current outstanding under the sukuk programme. Borrowings will part fund its planned capex of about RM1.2 billion. Finance-to-equity ratio is expected to increase to a moderate 0.65x (1H2024: 0.35x).
MARC Ratings expects the growth in earnings to be supported by a potential tariff upward revision of 15% from the existing rates in 2H2025 and in 2026.