MMC Corp Bhd (Nov 17, RM2.51)
Maintain trading buy at RM2.52 with revised fair value of RM3.65 (from RM3.47): Following our meeting with management and our Invest Malaysia Hong Kong 2011 event, we note that the Port of Tanjung Pelepas (PTP) has been growing at a stronger-than-expected 15.5% year-to-date in terms of volume, while Johor Port has secured a tariff hike after a 20-year wait and the double-tracking project remains on track.
With numerous large IPO such as Pavilion REIT and Felda Global hogging investor attention, MMC should not be left out in the cold in view of the upcoming Gas Malaysia Bhd IPO. The proposed IPO has secured approvals from Bursa Malaysia, MMC shareholders and the Economic Planning Unit.
All that is holding it back now is the condition requiring Gas Malaysia to sign a new gas supply agreement with Petronas. We understand demand from investors at the indicative IPO price of RM2.20 per share has been strong.
We build into our assumptions: (i) that MMC raises RM307 million from the sale of its 10.9% stake in Gas Malaysia and uses it to pare down its borrowings; (ii) Gas Malaysia’s share price settles at RM2, which we build into our sum-of-parts valuation for MMC. This will lift our earnings forecasts by 3% for 2012 and 4% for 2013 as the finance cost savings offset minority interest leakage.
Our sum-of-parts fair value is lifted to RM3.65 and we maintain our “trading buy” call, noting that much depends on the listing of Gas Malaysia. — OSK Research, Nov 17
This article appeared in The Edge Financial Daily, November 18, 2011.
Maintain trading buy at RM2.52 with revised fair value of RM3.65 (from RM3.47): Following our meeting with management and our Invest Malaysia Hong Kong 2011 event, we note that the Port of Tanjung Pelepas (PTP) has been growing at a stronger-than-expected 15.5% year-to-date in terms of volume, while Johor Port has secured a tariff hike after a 20-year wait and the double-tracking project remains on track.
With numerous large IPO such as Pavilion REIT and Felda Global hogging investor attention, MMC should not be left out in the cold in view of the upcoming Gas Malaysia Bhd IPO. The proposed IPO has secured approvals from Bursa Malaysia, MMC shareholders and the Economic Planning Unit.
All that is holding it back now is the condition requiring Gas Malaysia to sign a new gas supply agreement with Petronas. We understand demand from investors at the indicative IPO price of RM2.20 per share has been strong.
We build into our assumptions: (i) that MMC raises RM307 million from the sale of its 10.9% stake in Gas Malaysia and uses it to pare down its borrowings; (ii) Gas Malaysia’s share price settles at RM2, which we build into our sum-of-parts valuation for MMC. This will lift our earnings forecasts by 3% for 2012 and 4% for 2013 as the finance cost savings offset minority interest leakage.
Our sum-of-parts fair value is lifted to RM3.65 and we maintain our “trading buy” call, noting that much depends on the listing of Gas Malaysia. — OSK Research, Nov 17
This article appeared in The Edge Financial Daily, November 18, 2011.
