AmInvestment keeps ‘buy’ on MMC


  • Analyst Reports
  • Tuesday, 10 Dec 2019

AmInvest Research said the weak currency and cheaper port charges will also become a strength for the port operator as shipping lines are seeking ways to rationalise their cost structures amidst a tough operating environment.

KUALA LUMPUR: AmInvestment Research is maintaining its “buy” recommendation on MMC Corp Bhd.

The research unit has raised its forecast net profit for financial year 2020-2021 (FY20–FY21) by 1% respectively but maintained its fair value of RM1.58 based on “sum of parts”, valuing the group’s seaport business at 18 times forward earnings versus 23 times for its peer, Westport Holdings Bhd.

MMC, via a joint venture between two of its subsidiaries and external party Sedia Engineering Works Sdn Bhd, was awarded by Petronas a RM131.4mil contract for the engineering, procurement, construction and commissioning of the PGU-I Gas pipeline replacement project. It comprises pipeline and station works covering 33km in Terengganu, with a contract period of 35 months.

“We are positive on the latest development. Assuming a 67% share equivalent to RM87.6mil, this will boost MMC’s total outstanding order book to RM8079.3mil. We have adjusted our earnings forecasts to reflect this, ” it said in a report.

“We continue to like MMC due to its cheap implied valuation for the group’s port business (14 times forward price-earnings).

“We also believe MMC’s ports and logistics segment will benefit from the resilient outlook in the region’s port sector, underpinned by investments in the manufacturing sector that generates tremendous inbound and outbound throughput, ” it said.

AmInvest said the weak currency and cheaper port charges would become a strength for the port operator, as shipping lines are seeking ways to rationalise their cost structures amidst a tough operating environment.

This is due to a global economic slowdown and the impending International Maritime Organisation’s sulphur cap requirement that will be enforced in January 2020, which will result in additional costs for shipping lines.

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