PPAP's 3Q16 Review: Net profit surges 20.8% YoY

Container throughputs up 12.1% YoY

• Container throughputs in 3Q16 increased 12.1% YoY to a record-high of 48,837 TEUs. The double-digit growth, which came for the first time in three quarters (7.2% YoY in 2Q16, -6.8% YoY in 1Q16), was mainly driven by a strong increase in exports via PPAP. In particular, exports of garment products, which accounted for 75% of total container cargo for export, rose remarkably, up 50.9% from 12,122 TEUs in 2Q16 to 18,289 TEUs in 3Q16. Container cargo traffic growth, however, was slightly dragged down by a drop in imports. Meanwhile, general cargo volume jumped 127.0% YoY, putting the combined cargo volume (including gas & oil cargo) handled at PPAP between July and September at 634,945 tons, a 19.2% increase compared to the same period last year. During the first nine months 2016, container throughputs totaled 114,897 TEUs (+4.7% YoY), while the combined cargo volume came to 1,812,736 tons (+12.5% YoY).

Top-line sees solid growth

• Thanks to the increase in cargo traffic at PPAP, total revenue in 3Q16 reached a record-high of KHR19.5bn, growing a solid 9.1% YoY, or a 4.0%pt increase from 5.1% YoY in 2Q16. A breakdown of total revenue indicates that while the additional income from sand dredging declined by more than 87% YoY, main sources of revenue including income from stevedoring, lift-on lift-off (LOLO), and port services saw noticeable rises, climbing 17.5% YoY, 15.1% YoY, and 14.0% YoY, respectively. The source of revenue that saw the biggest growth, however, was income from storage services, which skyrocketed to KHR673.5mn from KHR93.3mn in the third quarter last year.
• In the first nine months of 2016, total revenue came to KHR49.8bn, up 8.2% from the same period a year earlier. Income from stevedoring rose 10.6% YoY, port services 16.8%, and storage 118.0%. Income from LOLO grew 7.9% YoY, well below 10%, most likely due to the implementation of the 5% reduction on LOLO service fees from mid-June, following the government’s instruction to lower the fees to help reduce the Kingdom’s transportation and logistics costs. Income from sand dredging, on the other hand, fell 47.3% YoY, due to increased competition, with the Ministry of Mine and Energy granting “sand dredging” licenses to other private firms.  

Operating margin high

• EBIT came to KHR8.92bn (+9.4% YoY) in 3Q16, nearly double that in 2Q16. EBIT margin was high at 45.7%, expanding 13.6%pt from the previous quarter. While total revenue grew 9.1% YoY, total operating expense increased by about the same rate of 10.9% YoY, so keeping the operating margin as high as in the same period last year. As in the previous two quarters, the increase in total operating expense was mainly driven by strong growth in salaries and wages as a result of post-listing organizational restructuring.

Earnings surge about 20% on tax incentive

• Pre-tax profit in 3Q16 rose 8.9% YoY to KHR7.60bn. Meanwhile, with the effective tax rate falling from 21.0% in 3Q15 to 12.4% in 3Q16 due to PPAP’s 3-year long tax incentive (2016-2018), net profit surged over 20% YoY to KHR6.66bn. As a result, the port operator’s net profit in the first three quarters of the year reached KHR13.29bn, up 20.2% compared to the same period last year.