MMC a proxy to revival in infrastructure flows

Port of Tanjong Pelepas

PETALING JAYA: For some time now, the market seems to overlook MMC Corp Bhd.

However, AllianceDBS Research in its latest report described the diversified group as one of the deepest value stocks with varied business encompassing almost the whole Malaysian economy.

From infrastructure, energy and utilities, airport, industrial land, water concession to ports, MMC is involved in many sectors.

The group’s recent fourth-quarter financial results point to a more sustained earnings recovery and the current market value of its land in Senai alone is worth more than its current market capitalisation, said the research house.

AllianceDBS noted that there are three main themes for the stock – a proxy to revival in infrastructure flows, proliferation of industrial boom beneficiary and ports turnaround.

The research house has maintained a “buy’’ call on the stock with a revised target price to RM1.50 a share from RM1.35 previously.

Last week, AmInvestment Research retained its “buy’’call and revised its fair value down slightly to RM1.49 a share from RM1.54.

However, the risks factors cited by AllianceDBS include corporate governance and related-party transactions. The Senai Airport Terminal Services Sdn Bhd purchase in 2008 saw its share price being punished severely.

The report said MMC has a outstanding order book of RM2.95bil, sufficient for revenue visibility of about two years.

However, there is some urgency to replenish its order book, capitalising on the higher budget allocation in Budget 2021, the research house said.

Apart from larger infrastructure projects like MRT3, MMC Engineering will benefit from the creation of more in-house projects from marine and port expansion which will still be smaller in nature.

For MRT3, the most ideal scenario is to award the project on a turnkey basis to the MMC-Gamuda JV based on a project delivery partner (PDP) structure.

It is more ideal to expedite and facilitate a direct award to MMC-Gamuda and the subsequent sub-contracting packages be given out via open tender, the house said.

It estimates MRT3 to be valued at RM20bil-RM25bil, with the tunnelling portion about RM12bil, or RM6bil each for MMC and Gamuda. This is not withstanding PDP fees if the PDP structure is adopted.

On ports, MMC is negotiating with the government to extend its ports concession to 2055.

The research house said MMC’s CEO painted a bullish tone for financial year 2021 (FY21), citing a carry through of its strong performance from fourth-quarter 2020 in January and February 2021. He believes visibility remains strong up until June 2021, the report said.

There is no pressing need for a port listing but given the strong earnings momentum, it may pave the way for a listing sooner than later. The group has recently said it may revive the IPO plan to potentially raise US$1bil by as early as end-2021, added AllianceDBS.

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