NCB - At a crossroads?

NCB - At a crossroads?

The share price of logistics provider and port operator NCB Holdings Bhd has been dropping to new and newer 52 week-low lately (compared from its 52 week-high of RM4.90 done on Aug 5, 2013). At the time of posting on March 21, NCB closed at RM3.25.

Long term and short term shareholders, especially the minorities must now be feeling they are at a crossroads time. Why? Should they hang on to their investment or dispose of it while they can or hope for the best that NCB will have a fast turnaround recovery?

No thanks to NCB which recently released a rather "poor" set of  results for its Financial Year 2013 - making just an eps of 11.4 sen. This poor set of results is due to a pre-tax loss of RM72.8 million (for Financial Year 2013)  suffered by one of its division, Kontena Nasional. Kontena Nasional also made a RM19.2 million loss for Financial Year 2012 according to claims in May last year.

The Malaysian Anti-Corruption Commission said it would begin investigations into the matter. The Edge reported that when it contacted NCB for updates on the financial clean-up, NCB declined to comment.

Now whether there will be more element of surprises from Kontena Nasional  which may result in more losses for NCB is still a naggling thought in the minds of investors.

The loss suffered by Kontena Nasional is severely dragging down the profitable profits of NCB's other divisions  Compare it to its previous many years and one will know find it hard to believe it.

Those previous years' good results were accompanied by a string of interim, special and final dividends announcements that were exceptionally high. But for Financial Year 2013, no news of a final or special dividends were announced (NCB normally announce it together with the 4th Quarterly results). So far, a meagre interim dividend of only RM35 was paid on Oct 10, 2013.  Chances of a final or even a special dividend are virtually gone (in my opinion).

On the plus side, NCB's new wharf, which came on-stream in December last year could be the much-needed boost. The new Wharf 8A, which is part of Northport's Container Terminal 4, will bring Northport's total annual throughput capacity to 5.6 million twenty-foot equivalent units, up to 600,000 TEUs.

But NCB still has a strong competitor in Westport Holdings Bhd. However, a market observer says that for NCB to compete with Westports, it has to establish that it can be just as efficient.

Several research house have given different target price for NCB. Maybank Investment Bank research has a "buy" call on the stock with a target price of RM4.84 while RHB Research has placed a "neutral" call at RM3.50.

Which research house would you trust?

High Dividends during the last few years

A check on the website of www.malaysiastock.biz revealed that from Financial Year 2006 to 2012, NCB has always paid out an Interim and Final Dividend including Special Dividend. And these dividends were quiet a big amounts for the shareholders. From 2006 to 2012, the dividends were RM265 (2006), RM250 (2007), RM250 (2008), RM280 (2009), RM370 (2010), RM760 (2011) and RM655 (2012).

Going forward, unless the uncertainty of Kontena Nasional is totally removed, one can only hope that NCB will see a strong recovery in Financial Year 2014.

NCB's parent company, Permodalan Nasional Bhd (PNB) has a controlling stake of 47.71% in the company through Skim Amanah Saham Bumiputera. The other major shareholders are MISC Bhd (15.73%) and Retirement Fund Inc (9.135).

Kassim is also a shareholder of NCB. I bought  NCB at RM3.15 on Feb 19, 2010. Having seen my "paper profit" evaporating from NCB's spiralling down trend price, I am perhaps "comforted" by the massive amount dividends I have received totalling RM3,710.00 since my purchase date.

The perils of not locking in profits

The downtrend price (back to my original buying price) also bring to mind the perils of not taking profits especially profits that exceeded 30%. As  an investor, making an investment to buy a counter is not that difficult. Once a counter has been bought (say at RM2), as long as the share price of that counter stays plus minus at the RM2 levels , we are unlikely to be affected at all. In fact, if it stays at that tight range, we are likely not to even check on the share price at all. (What for as there won't be any wide movement of the share price thence we are just wasting our time to check on it).

However should the counter's share price starts to move north gradually and higher and higher and of course sometimes retreats a bit, but somehow remains higher and stays at that level, chances are we would feel excited about this "new increase of wealth although still in paper profit". Checking on its share price now and then would be a looking forward activity for each time the share moves up a bit would bring the smiles out.

After all, the main purpose of investing is always to see our investment appreciate over the times and also to protect our profits especially reasonable profits of over 30%.

But sometimes, we are always reminded by the teaching ideas by so many "stock and investment gurus" about the benefit of long-term investment. So much so that many times, when we are in a position to lock in our huge gains, we refuse to do so and when it starts to retreat, we still cling on to our investment believing that it is only a mild correction or profit taking and will rebounce back to its original high again.

Why I did not lock in profits this time from my investment in NCB? I had every opportunity and time in the world to do so. From April to Aug 21, 2013, the NCB's share price was always above RM4.50. It touched a high of RM4.90 on Aug 7. How could I allow NCB to retreat back all the gains and worse, at a price that is above my original buying price? I am a seasoned investor since 1993 yet I could not protect my winning investment in NCB this time. (This goes to show that we are forever learning something everytime). In this case, I learned the bitter lesson of not taking profit when the opportunity was still there.

At the moment, I am still at the crossroads. Should I sell my investment in NCB off before it gets worse or hope for a speedy recovery? You see, not doing anything right now is also considered as making a decision to hold on to my investment in NCB.

Perhaps a more telling time would be when NCB announces its 1st Quarter Results on April or May this year. Should there be a normalised results (assuming very minimum loss or no loss from Kontena Nasional), I have to believe that NCB would regain some grounds and be trading at a higher price. But it the losses of Kontena Nasional continues and affect the overall result of NCB, then I won't be surprised if NCB plunges below the RM3 levels.

"Kudos" to McDonalds Malaysia

On March 15, 2014, McDonalds Malaysia carried out a half-page colour advertisement in The Star. In the advertisement, McDonalds extended their sincere hope and prayer for the safety and well-being of the passengers and cabin crew of Malaysia Airlines Flight MH370.

In light of the current developments surrounding Flight MH370, McDonalds announced the postponement of National Breakfast Day 2014 which was scheduled to take place on March 17, 2014.

At times like this when the whole nation is coming together as one, I am extremely pleased that McDonalds has displayed great social responsibility as a corporate company to postpone the National Breakfast Day to a more suitable time.

Thank you McDonalds for sharing the deep feelings of the whole nation for MH370. Together we must continue to pray hard for the passengers and cabin crew of Malaysia Airlines Flight MH370.