NCB- bottom-line hit by slower external trade

Result Update

For QE31/12/2012, NCB's net profit dropped by 48% q-o-q or 47% y-o-y to RM23.5 million while revenue dropped by 7% q-o-q or 1% y-o-y to RM236 million. The pre-tax profit has registered a decrease of 22.8% mainly due to lower revenue from container operations. The drop in container operations is consistent with the drop in Malaysia's import & export for October-December 2012 (see Table 2 below).


Table 1: NCB's last 8 quarterly results


Chart 1: NCB's last 19 quarterly results

Malaysian External Trade

NCB's business volume should be closely linked to the country's external trade performance. For 2012, our total trade rose 3 percent to RM1.31 trillion. Exports rose 0.6 percent to RM702.2 billion, slowing down sharply from 8.7 percent growth in 2011. Imports expanded 5.9 percent to RM607.4 billion. For more go here. 

However, Malaysian external trade took a dip in 4Q2012. From government statistics (extracted in Table 2 below), we can see that import & export numbers had been declining m-o-m for all three months- except for export (not seasonally adjusted) for October 2012. For more details, go to here, here and here. 


Table 2: Malaysia's Export & Import for October, November & December 2012 (Source: Statistic.gov.my)

While global trade is expected to be sluggish for 2013 (here & here), Malaysia may see a pick-up in trade due to increased import due to increased private investment as well as increased trade with EU & China due to greater cooperation (here). If this pans out as expected, we should see a recovery in revenue & profit for NCB in 1Q2013.

Valuation

NCB (closed at RM4.50 yesterday) is now trading at a PE of 13 times (based on last 4 quarters' EPS of 34.6 sen). At this PE, NCB is deemed reasonably priced.

Technical Outlook

NCB is in an uptrend where we can use the 40-week SMA line as a proxy uptrend line. It is presently resting on the horizontal line RM4.50.


Chart 2: NCB's weekly chart as at Mar 7, 2013 Source: Quickcharts)

Conclusion

Despite the poorer financial performance, NCB is still a good stock for long-term investment based on its positive technical outlook and its fair valuation. I would rate it as a HOLD at the present price of RM4.50.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, NCB.