NCB: Cheap enough?

New Development

It is reported in The Edge that Tan Sri Syed Mokhtar Albukhary's 51.76%-controlled MMC Corp Bhd is in talks with MISC Bhd to buy the latter’s 15.73%-stake in loss-making NCB Holdings Bhd. A source noted that NCB might be used as a listed vehicle for the backdoor listing of Syed Mokhtar’s port businesses, such as Port of Tanjung Pelepas (PTP) in southern Johor and Penang Port. For more, go here.

Recent Results Update

For QE30/9/2014, NCB reported a net loss of RM2.3 million as compared to a net profit of RM2.8 million recorded in QE30/6/2014 or RM27 million recorded last year. The loss was attributed to lower revenue registered for the third quarter plus higher operating, depreciation and amortization costs and interest expenses.

The results for NCB over the past 3 quarters was affected by adjustment made in the book of its ailing subsidiary, Kontena Nasional Bhd ('KNB'). It was reported that a special review of KNB's books by Pricewaterhouse Coopers had revealed that KNB's revenue was being inflated, while operating expenditure was being suppressed. KNB’s adjustments amounted to RM56.6 million, out of which RM32 million was accrual of costs while an additional RM24.6 million was over recognition of revenue spanning from 2010 to 2013.

Table: NCB's last 8 quarterly results


Chart 1: NCBs last 26 quarterly results

Valuation

NCB (at RM2.33 yesterday) is now trading at a PB of 0.8 time.As the company's earning is negligible, the PE computed is meaningless.

Technical Outlook

NCB has retreated back to its gradual long-term uptrend line at RM2.40. This coincides with its horizontal line of RM2.40.


 Chart 2: NCB's monthly chart as at Nov 24, 2014 (Source: Share Investors)


Conclusion

Despite the poor financial performance, NCB may be worth considering for a long-term investment due to its substantial decline. The drop has brought out value in the stock as it trades at 0.8x its NTA per share. It has tested its long-term uptrend line and could slowly recover from here.

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.