Hi dicky,

The dividend will be paid upon completion. And the condition precedent (requirement) for completion is approval by icon's bod and shareholders. So i think they will call an EGM to get approval from shareholders soon. Why soon? In the 30th Aug, they did mentionned a dateline set on 30 Nov for completion.

Regards.

Dicky,

Seems like the board of directors has already approved the dividend. Now waiting for the completion. Based on the documents announced on 30 August, the completion should be quite soon. Closing date for the completion is between 3rd October and 30th Nov (refer to pg 9 under "Closing". Once closed, just need to wait for the announcement on when the dividend is to be paid.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3288758

Yeah. Just take the RM180mil divide by the share outstanding. Should be around 6.65 sens per share.

I think most news outlet missed the big dividend payout announced yesterday. Of the rm385mil to be received for the disposal of the jack up rig, rm180mil will be paid as dividend to shareholders. Or 6.65sens per share. Might not see it from just the headline announcement. Need to read the docs.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3298458

In terms of valuation it is still trading way below its historical mean. On average the stock normally trades at 13.5x fwd PE and 1.2x fwd PB. At the current fwd PE of only 4.7x and PB of only 0.3x, I think investor could be well rewarded once the clouds of the interest rate hike passes.

In addition to that, the company will received a sum of USD120mil for the disposal of OMS which will strengthen its balance sheet further to a net cash position of more than RM500 mil or 47 sens per share.

The company also have a dividend payment policy of 30% of profit of 2 sens per share, whichever is higher. So if there is no capital needs in the future, given that a big chunck of the capex spending has already pass with the completion of MPAS facility last year, investors might be rewarded further with a higher dividend payment in the future. If the company managed to deliver a profit of RM200 mil, this will translate to a dividend payment of RM60mil or 5.5 sens per share which gives a dividend yield of 6.5% at the current share price.

Unomi,

There is an article in the Edge Weekly that just came out today. The title is "Petronas US$400 mil drilling fluids tender likely to be out soon". Apparently the front runner for this contract is CMSB via the newly acquired O&G business from Scomi. I was wondering why they decided to buy the O&G business from Scomi. Hats off to management if they really end up winning the RM1.8 bil contract from Petronas.

Hi unomi,
Agree with your assessment. Sarawak state government is budgeting a capex spending of RM100bil till 2030 which would provide ample opportunity to CMSB especially given the direct strategic collaboration that it has with the State. FYI, Sarawak Economic Development Corporation (SEDC) is a major shareholder in CMSB with 5.7% holdings. But more importantly, CMSB construction business is actually a JV between the company and SEDC via both SEDC Resources Sdn Bhd and PPES Work (Sarawak) Sdn Bhd. SEDC is actually the majority owner of both companies with 51% (CMSB owns the remaining 49%). You would assume that Sarawak State would probably award a big portion of any construction contracts to these companies first given their direct interest in them.

I would categorise KSL as a value and post covid revival stock.

Pre covid, the company has always been able to deliver a profit of RM200mil to its share holders (From 2014 to 2019 and this even after excluding all the one off gains like fair value adjustments etc). If they can return back to precovid level (which i believe is highly likely), then at the current share price, it would mean that the company is only trading at a mere 3.2x PE.

An immediate catalyst would be the opening of Malaysia and Singapore borders as tourist from Singapore are actually the biggest spender for its hotel and mall business. The 2 business combined normally deliver a profit of 20 to 25 mil per quarter during precovid time. Now it is only delivering an operational profit of RM2 mil per quarter.

thanks jenny. Appreciate the info.

One of the few steel companies that has its main operation outside of Selangor. With this in mind i think they would not be too much affected by the 3.0 MCO. Management did mentioned that their main operation in Perak had resume operation in the 1st week of July so 3Q21 result should still show good growth vs other steel companies that are heavily centered in Selangor.

Expecting the 3Q21 result to be a catalyst for the share price to retest the RM2.20 level.

I think you need to have a certain level of understanding if you decide to invest in CMSB.

Prior to covid, the company's has not been traded below RM2 since 2013 (after adjusting to the bonus issue exercise in 2014). It fell under RM2 during the first MCO but managed to rebound back in the 1st half of 2021.

It fall back to under RM2 and reaching to as low as RM1.05 after the governance issue of its construction arm PPES Work (Sarawak) Sdn Bhd emerge in May. As of Dec 2020, PPES NTA is only RM80mil which means CMSB exposure to PPES is only RM40mil (CMSB owns 49% of PPES, the remaining 51% is owned by the Sarawak State).

Even if the outcome of the report is negative and CMSB has to write off the whole of PPES, the amount of exposure is only RM40mil vs its NTA of RM2.9bil. This only represent a mere 1.4% of the company's equity.

Which is why it think that the market might be over reacting a bit with the governance issue.

On top of that the 2022 budget is highly beneficial to the Sarawak state which would also benefit CMSB given the Sarawak State government direct exposure in the company.

Near term positive catalyst would emerge post KPMG report finding if it shows that the exposure to CMSB is minimal. I would assume that CMSB would potentially rebound back to above RM2 level. Hopefully they can finalize the findings by the end of November.

I think the market is overreacting on the news of the new expanded sugar tax. Sugar tax are not new. It was first introduce back in July 2019. Even then the sales volume of msm was not affected ( sales volume actually grew in 2019 ).

Now the government has decided to expend it to premix sugar drink like Milo or your 3 in 1 coffee. I don't think it will affect Msm sales that much.

I will be more interested to see if the company turnaround plan is a success or not. Hope that they can deliver good profit in 3q21. If they achieved that, then the turnaround story would potentially put MSM back in investors radar. Management has a target to bring back MSM profit level to RM 240mil. They hope to achieved this in 2023.

Actually sugar tax has already been implemented since 2019. Its not a new tax.

https://www.mondaq.com/tax-authorities/1088530/introduction-to-malaysian-sugar-tax

Hope it clarifies some of the concerns.

I see this selling as an opportunity to add some more position into the company.
Valuation is really undemanding based on most market metrics (PE, PB, EV/EBITDA etc).
The current price provides shareholders with ample margin of safety. Net cash position alone is already RM2.18 per share. Excluding cash, the market is valuing the business at only 55 sens per share. Ridiculously low in my opinion.

Actually for the deal, Tan Sri will give an advance to the company first. You can verify the announcement. Most of SCR exercises are like that (offeror provide advance/financing for the exercise).

I still think there will be no issue for the BOD to deliberate. Now the issue might be whether there will be another delay or not due to the MCO.

Probability of deal rejection would only appear during EGM. Basically if PNB rejects it. Even this is doubtful given Tan Sri good relationship with PNB. Highly likely they have already discuss on the deal prior to making the announcement.

That being said the volume of selling today is pretty high. Don't think anyone has this type of volume beside Mr Lam and EPF (that is if they still have yet to sell since Mar 2021).

Good Luck.

The Selangor region office is for sure closed as Selangor is still under EMCO. But the company's main operation center near ipoh and regional operation in Tuaran (Sabah) would most likely have already restarted operation as both Perak and Sabah have already entered the 2nd phase of the National Recovery Plan.

https://choobee.com/contact-us/

Investors are worried for the steel companies due to the fact that they are not allowed to operate in the 1st phase of National Recovery Plan (NRP).

That being said, Choo Bee is slightly different from the other steel players. For one, its mains operation is actually located in Perak, in Lahat (near Ipoh) to be precise. The other 3 main locations are Ulu Kinta (also in Perak), Tuaran (Sabah) and Kapar (Selangor).

Only the warehouse in Selangor are not operating at the moment. The other locations should have already started operations given that both Perak and Sabah has already enter the 2nd Phase of NRP (steel companies are allowed to operate in Phase 2).

Like all steel players, Choo Bee valuation is undemanding both in terms of PE and PB. For 1Q21 the company managed to deliver a profit of RM27mil. Assuming a profit of RM87mil (or average RM20mil per quarter for the rest of 2021), the current market price would translate to a PE of a mere 2.6x.

In terms of PB it is only trading at 0.45x with no debt in its book. It has a net cash of around RM100mil or RM0.77 per share with steady cash flow generation from operation every year.

I just think that the company is too cheap at the moment for market to ignore.

Investor69,

I agree with your assessment.

As per what ziyang mentioned, the extension of deadline would most probably due to delay in preparation of documents due to the FMCO and EMCO.

BOD will deliberate the offer for minority shareholders to vote.

During the EGM, the only party that has enough shares to vote down the offer is PNB. Given Tan Sri relationship with them, I think it is highly likely that he had already discuss with PNB on the offer prior to the announcement. Which is why I believe the probability for the SCR to go through is high.

If shareholder approved of the offer during the EGM, it is as good as saying MMC is worth RM2. Most of the time share price will move very close to the offer price after the EGM.

From my research, most of the stocks that succeed in their EGM would trade at less than 5% to the offer price.

Post EGM,
Pelangi traded at 35 sens (offer price 36.5 sens).
MTD Acpi traded at 27 sens (offer at 28 sens)
Degem traded at 1.08 (offer at 1.10)
Mintye traded at 1.33 (offer at 1.36)

The only one that traded at more than 5% discount was Kwantas. Post EGM it traded at 1.45 (offer at 1.65)

Basically to get the payout you might not need to wait till the completion.

From my understanding, factories can still operate but with strict SOP. Its not total lockdown like the one we are facing in Selangor. The recent movement control will last 15 days from 9 July to 24 July.

Most of the factories in Ho Chi Minh are still in operation during the MCO but with lower capacity.

Those that are forced to close are factories that have direct covid cases but government will allow them to reopen once they set up covid prevention and containment measures.

We also need to understand why Tan Sri is doing this SCR. It's mainly for the restructuring of MMC group in order to facilitate the listing (IPO) of the port business. To say that he decides to abandon the SCR would mean that he is also abandoning the port business IPO. I just dont believe that is the case. It's known amongst the market participants that he has been looking to monetise the port business since 2017. Now would be the best to do so given the bullish trade environment.

I think most of this is panic selling. As i mentioned earlier, SCR is a binary play for the offeror (Tan Sri Syed Mokhtar). If the deal gets rejected during the EGM (will only need 10% of minority to reject or in MMC case 4.8% of total shares outstanding) he would have wasted time and money in the exercise.

It would have been easier for him to forced a privitisation by doing a General Offer. Given that he already owns 51.8% and PNB 21.0%, he would only need to buy less than 3% from other minority to forced a privatization. Once the free float is below 25%, MMC is basically in breach of Bursa listing requirement forcing the company to either increase the float or force delisting.

Most likely Tan Sri would have already approach PNB prior to the SCR exercise. Which is why i believe that PNB would except this deal once it reaches the EGM.

Agree with emsvsi. BOD will just deliberate and decide to present the offer to the shareholders. Just look at BOD members. Most of them are Tan Sri guys anyway.

The recent increase in covid cases has pull down the overall market. Even those that are operating during the FMCO are also seeing their share price being sold. For example MSM. Its refineries are located in Prai (Penang) and Tanjung Langsat (Johor). Penang has already move into phase 2 of the National Recovery Plan (NRP) while Johor is expected to enter phase 2 soon (expected next week). Even when the states are in Phase 1, MSM is allowed to operate given that it is considered as an essential services provider.

For those that plan to sell or already sold MSM, you still need to consider where best to put your money. Unless you decide to invest abroad then you will still face the same issues. It would be better to invest in companies that are less affected by the FMCO/ EMCO as it would provide you with potential undisrupted earning for FY20.

Refer to my post on 8th July to why i think MSM will post good result for this year regardless of the FMCO.

A 11% return for those that have the time to wait till completion is actually not a bad deal.

Off course there is a risk of it being rejected but currently the only party that has the ability to do so would be PNB which has 20.95% interest. The deal will fall through if more than 4.82 % of shareholders reject it during the EGM.

Other shareholders are just too small and given that these same shareholders were also selling their share before the announcement of the deal, we could probably safely assume that they would accept the deal. EPF has 1.77% interest. They had 5.02% back in Mar 19 but sold a lot in 2020 when the share price was well below RM1 level. Urusharta has only 0.51% down from the 7.68% back in Mar 19. Similar to EPF they also sold a lot when price was below RM1.

Given that Tan Sri Syed Mokhtar decides to take this company private via Selective Capital Reduction (SCR) instead of a General Offer (GO) just shows how confident he is that the deal will likely go through.

Normally one would have already done their preliminary work prior to an SCR mainly due to the binary outcome of the exercise, either it will succeed or it will fail. If it fails, Tan Sri would have spend a lot of money on advisors and time without having been able to increase his equity interest. In a GO, even if it fails, he would still be able to increase his equity from those that decides to accept the offer.

I would assume he has already approach PNB and have an informal agreement with them prior to launching the SCR.

Remember the main reason for this exercise is for them to be able to do an IPO of the port business. They are not able to do so with the current MMC structure given that the port business itself is already the principal operation of MMC.

Basically the share price will start to move closer to the offer price after the EGM which should be sometime in September (normally 2 month after deliberation by BOD). So investors might not have to wait till the completion to get the 10% return. Good luck.

Malaysia sugar industry is currently being controlled by 2 companies only, MSM and Central Sugar Refinery (CSR). MSM is controlled by Felda with 66.28% while CSR is controlled by Tan Sri Syed Mokhtar.

CSR has 2 refineries: Shah Alam with 600 kMT and Padang Terap, Kedah with 200 kMT

MSM previously had 3 but decide to close its Chuping refinery and bring the machines and production capacity to Johor. So now it has 2: Prai, Penang with 1,050kMT and Tanjung Langsat, Johor with 1,000 kMT.

Even though CSR has 2 refineries, the one in Padang Terap is actually not that efficient. The location itself is far from the nearest port which is Penang Port. This alone makes the transportation cost higher when compared to other sugar produce by other refineries which itself would increase the production cost of sugar.

This was actually one of the main reason why MSM decided to close down the Chuping refinery. I would assume Tan Sri Syed would also come up with similar analysis as MSM for his Padang Terap business.

This is why i believe the main competitor for MSM is only the Shah Alam refinery of 600kMT.

That being said there is still oversupply situation for the domestic market. MSM decision to focus on export market is in part to increase the utilisation rate of the new Johor refinery.

Management has indicated that the utilisation rate of Johor to start increase to more than 50% or 125kMT sugar in 3Q21 onwards. This is a lot higher vs the 22% or 55kMT per quarter output recorded in Jan to June 2021. Most of the output increase will come from higher margin products such as fine syrup and liquid sugar. Investor should see a substantial increase in the group bottom line from 3Q21.

WIth the increase of sugar price which is now hovering around 17 USD sens to 18 USD sens/ lbs versus MSM cost of less than 14 USD sens/lbs, I am targeting a full year profit of around RM 100mil for the whole of 2021. A big portion of the profit will come in in 3Q and 4Q base on the reason mentioned above. This translate to a fwd PE of only 8.7x.

This is a lot lower compared to what it use to be trading at prior to the fall in profit . In FY16 the group managed to deliver a profit of RM120mil. Excluding impairment the profit was actually around RM150mil. It was trading at more than RM4.40 when the 4Q16 result was announce. This translate to a PE of more than 25x.

The potential for MSM share price to go up further is high if it managed to deliver the profit that it is expected of it in FY21.

The signs are mostly pointing to MSM having a good year in FY21 rather than not.

Average sugar price for 2Q21 is around 16.78 US sens/lbs vs last year's 2Q20 average of only 11.05 sens/lbs. Most analysts are expecting sugar price to edge up higher given that ethanol price (which correlate with oil price) is also going up. Sugar cane producer mostly decide on what to due with the sugar cane based on the price of ethanol and sugar. Brazil producer for example will produce more ethanol when the price is high. In 2020 Brazil produce a lot of sugar mainly because ethanol price tumble to 0.84 USD/Gal vs the current 2.48 USD/ Gal. Average price for Ethanol pre pandemic (in 2019 and 2018) was only 1.40 USD/ Gal.

MSM has locked its raw sugar input at less than 14 sens which means potentially the GP margin will be higher if sugar price trend keeps going up.

MSM target to sell 1.3 mil MT of sugar of which most of the growth will come from high margin products like fine syrup and liquid sugar. Most of the volume growth will be from the MSM Johor refinery which will improve the ustilisation rate from a mere 22% in 1H21 to 50% in 2H21. Besides increasing the revenue this would also reduce the average cost of refining of sugar per MT.

Lower refinery cost. Mainly due to lower gas price of RM26.85/MMBtu in 2Q21 vs RM33.65 for the whole of 2020. But also due to the improvement in MSM Johor Boilers (where the company has perform a maintenance and optimisation initiative in 2Q21) which would lower the consumption of gas during refinery processes.

I think MSM have the potential to deliver a profit of around RM100mil for 2021. Most of the profit will come in 2H21 when both MSM Johor and Prai will be running back at their optimum level.

For those worried about the duration of FMCO, MSM is considered as essential service and thus allowed to operate during the FMCO. Currently, given the still high number of infection, we are still not sure when the government will allow other business to operate.

Knee jerk reaction to the extention of FMCO. I think investors need to understand that MSM businesses are considered essential services. They are still able to operate.

The extension of restaurants operating time from 6 am to 10 pm is also a positive news as it would mean higher demand from the retail/ wholesale segment. MSM's industry players most are not that affected by the fmco as the Food manufacturing is considered as essential services.

kens88,

Magni main operation is actually in Vietnam. They have 10 factories located mostly in Ho Chi Minh area with a total combined of 13,600 line workers. Most of the workers in Vietnam are locals. The 2 factories in Penang are relatively small compared to those in Vietnam.

So i don't think they have issues with forced labour.

Hanoi,

The plant has already been running back since 3rd June.

MSM will probably continue to deliver better result for the rest of the year mainly from the higher sales volume targeted for this year 1.3mil tonne vs 1.02mil tonne in FY20. Most of the volume will be coming in the 3Q and 4Q of the year.

Sugar price has rebounded substantially from the low recorded back in 2Q20. Back then NY#11 sugar was only selling at an average of USD cent 11 per pound vs 2Q21 average of USD cents 16.50 per pound. Expect result for 2Q21 to be impacted a bit by the sudden stoppage of Prai refinery but management has indicated that the total loss to the bottom line will not exceed 5% of total expected annual profit.

From 3Q21 onwards we should see better utilisation rate from the Johor refinery. Management is targeting the refinery to average in at 50% utilisation rate for 2H21 vs 1H21 average utilisation rate of only around 22%. This should help increase the total sales numbers but more importantly the group bottom line given better margin from lower average running cost of refining the sugars.

Bottom line will also be helped by management decision to lock in 85% of FY21 the raw sugar cost at USD cent 13 to 14 per pound vs the current spot price of above 16 sens. This should improve the group's profit margin further.

Another big cost component that has seen a major decrease in price is natural gas which is now price at RM 26.85 per MMBtu vs FY20 average of RM 33.65 per MMBtu.

All in all expect MSM financials to continue showing improvement from in the 2Q21 onwards.

Actually all of MMC main operations are allowed to open during the total lockdown.

Ports, energy (Malakoff and Gas Malaysia, and Engineering (construction of MRT which is under "critical construction").

Just to remind investors, even a full lock down on Selangor would have limited impact on MMC businesses. In particular the 5 ports of which 4 are located outside of Selangor. Even Northport which is in Klang will continue to operate during lockdown. You can check the financial performance of MMC in 1Q and 2Q of 2020 which is when the MCO 1.0 was in place. In both quarters MMC deliver profit growth to its shareholders.

Selangor state does not seem to want a full lock down. Federal government also does not seem to want a full lock down. I guess it safe to assume there will be none.

https://www.freemalaysiatoday.com/category/nation/2021/05/19/selangor-govt-against-a-full-blown-mco/


https://www.theedgemarkets.com/article/move-keep-economy-open-under-latest-mco-helps-prevent-unemployment-%E2%80%94-tengku-zafrul

I think when studying market movement of a share price, you need to first to make a distinction between broad market movement and company specific. MMC fell yesterday but so did the broad market. For every stock that was up yesterday almost 5 were in the red. The main reason for this was mainly due to the increasing covid cases with rumours of a potential full lock down in Selangor.

Now if you study MMC fy20 performance, you would understand that the company is not really affected by any of the MCO. Even in the 1st MCO, MMC was still able to operate normally given that most of its business is considered as essential services. The company actually managed to deliver a profit growth of 8% during the mco period.

Those who decides to sell will still need to find a place to put their money. If you are sceptic of the malaysia economy, then the best place to put your money is either in malaysia bond market (with the hope of another round of interest rate cut to support the economy) or you have to put your money in other foreign market. If you still believe in the malaysian economy to rebound back (i am from this crowd), then you will need to find companies in bursa that could deliver the profit growth in the future.

I still think MMC should be considered as it is resilient in its performance during covid period, potential growth in earnings from the increasing volume of trades and undemanding valuation of only 6x PE vs the industry average of more than 15x. The CEO was also optimistic on the port performance in 2021 in particular PTP. During the AGM, he did mentioned that PTP was at a reflection point in terms of profit. Any additional volume to PTP now will contribute exponentially to the group bottom line mainly from the expension of profit margin. Anyway, we will see this in the upcoming 1Q21 result (should be out soon).

Hi paul.

Actually we can know epf position after the quarterly result. Management usually prepare a presentation deck providing a summary to the quarter result performance. Anyway, they normally prepare a slide on the major shareholders of MMC. We can see then whether epf % ownership has moved. They only list major local institutional investors. Other investors are lump in "Retailer" (this includes Mr Lam) and "Foreign".

Pinky,

I think Mr Lam bought his block of shares when epf and urusharta were dumping it back in March 2020. Both epf and urusharta were selling in high volume at price below 70 sens. The share price did reach a low of less than 50 sens but volume was not high. I think it was an opportunistic move by Mr Lam. His average cost should be between 60 sens to 70 sens. I wonder if he is actually a proxy to someone else.....

Thanks emsvsi. Appreciate the constant updates. Sometimes i miss some of the news on other ports in the regions.

Ravindran,

MMC is expected to still hold a controlling stake in the port business. The touted IPO plan to raised around RM4bil actually will come from MMC selling minority stakes during the IPO. My assumption is they will sell at most 40% interest in the port business. This would value MMC current holdings in the port business at RM10bil (or RM 3.28 per share) vs the current market cap of only RM3.5bil.

DBS Bank (Singapore based) in their 11 Mar analyst report was more aggressive in their assumptions. They assume that the RM 4bil to be raised during the IPO will be from selling 30% stake which give the port business a higher value of RM13.3bil or RM4.38 per share. They even provided a scenario analysis of the port business valuation based on EV/EBITDA multiples running from 10x to 14x. Based on this analysis the port value ranges from RM13.5bil to RM20.3 bil (or RM4.40 to RM6.67 per share).

This is why the port IPO would be the biggest catalyst for MMC as it will provide market with a more higher valuation of the port business which itself would potentially provide a rerating catalyst for MMC shares.

At the moment MMC is only trading at a 12 month trailing PE of 9x and forward PE of less than 6x. Compared to Westport (its closest competitors) which is trading at a PE of more than 20x. Even the smallest port operator in Bursa, Suria Capital is currently trading at a forward PE of more than 10x.

Most people will be waiting for a clearer guidance from the government in relation to the potential MCO 3.0. Even though it is highly likely that another MCO will be announce, people need to remember that in MCO 2.0 the government actually provide leeway to businesses to continue operating at almost normal capacity. Expect similar guidance to be given in MCO 3.0.

Industries that are negatively affected are those that are mainly in the retail and travel sectors like F&B, airlines related, automotive etc. For most other companies like MMC which is categorize as essential business, operations are not affected that much. Even in the 1st MCO the company still managed to deliver profit growth in 1Q20. MCO 2.0 also did not affect the company with the good result expected to be deliver in 1Q21.

Hi paul,

Thanks for your input. Agree that the cancellation of the major infra project was a big negative affect for MMC back in 2018. But if you look at the share price, it actually started to fall from around 2.50 level back in Aug 2017 to 1.40 just before the election. For me this fall coincide with the initial announcement of potential US China trade war in Aug 2017. Then worsen starting Jan 2018 with the first tariff impose on solar panels and washing machines product which are mainly imported from China.

Then MMC share price fell again from rm1.50 to around rm1 after the general election. Which is in line with what you had highlighted.

Anyway, both of the issues above seems to be improving (better global trade partnership and the revival of MRT3) which should be good for MMC performance and outlook in the future.

With regards to the crazy selling by some institutional investors, i think we should see their influence to the share price reduce substantially soon. The biggest issue for me was actually Urusharta which took ownership of the shares from Tabung Haji in 2018. In Mar 2019 they had 234mil share. They actually panic sell their holdings back in mar 2020 to bring down their holdings to 103mil. And continue to sell aggressively throughout 2020. The good news is that as of 19 mar 2021 they only have 15.5mil only. EPF also panic sell back in Mar 2020 bringing down their holdings from 153 mil to 53mil as of end mar 20. And since then their holdings has remain constant. As of 19 mar 2021 they still hold 54mil shares. It seems that the one that has been buying shares sold by our institution are foreign funds which is good as i think they are more value oriented.

If urusharta or any other big shareholders want to sell, i think they would have already reduce their holdings substantially given that the total transaction volume since 19 Mar 2021 (the most recent shareholder list date) to 26 Apr 2021 was around 440mil shares.

I dont think Tan Sri Syed and PNB are looking to reduce their ownership given the positive outlook lining up for the company. Both hold around 72.8% interest in MMC.

ystmywh,

The reason to the fall in share price that started back in end 2017 was mainly due to Trump's announcement of a trade war strategy to other major economies in particular China ( he also started a trade war with Europe and even US major trade partners like Mexico and Canada). The US-China trade war officially started in January 2018. This had dampen the outlook of global trade which directly affected port operators like MMC.

However with Biden, most analysts are assuming a normalised outlook for the global trades. In addition, with the normalisation of major economics like US, China and Europe, we should expect global trades to rebound back. Actually we have seen this already in 4Q20. Hence why i believe, MMC should be at least trading at pre trade war level of above RM2 per share.

I think the bankers/ analysts are waiting for another positive catalyst before upgrading their target price. Those catalysts, i believe, would be the continuation of the good result of 4Q20 or announcement of potential ipo of the port business.

Take DBS target price of RM1.50 highlighted by bobochacha. If you looked at the full report, the RM1.50 was actually derived after putting a 40% discount on its Sum Of Part Valuation (SOP). The actual SOP valuation given by DBS was around RM2.50. That being said the RM1.50 Target price was an improvement from the previous RM1.35 TP set by DBS prior to 4Q20 result. So i believe if MMC could continue to show the good result, bankers will start to reduce the discount rates applied in their valuation.

In the same DBS report they also shows why they believe an IPO of the port business would provide the biggest valuation rerating. They did a scenario analysis of the port ipo based on valuation ranges from EV/EBITDA of 10x to 14x. That translate to a market cap of RM13.5bil to RM20.3bil for the port business alone. Or rm4.40 to rm6.60 per share.

Currently DBS value the port business at rm4bil (even this is undervalue as they derive the valuation from PTP, Johor Port and Northport only). But after the 40% discount, the value given is only RM2.4bil or rm0.79 per share. So you can see that the potential upside to MMC valuation will be the biggest if there is a potential IPO on its port business.

Apart from the earning growth to be deliver in FY21, the biggest rerating catalyst for the company would be the monetisation of the port business (here probably would be the IPO).

Assuming MMC can deliver a total profit of RM600mil and assuming the market still value the company at the current 9xPE, that would translate to a market cap of RM5.4bil or RM1.77 per share. Take note that the smallest port operator, Suria Capital is currently trading at PE of 11x while the 2nd largest port operator, Westport is currently trading at PE of 22x.

Now if MMC succeed in listing its port business, I believe that market would give a fairer valuation to MMC. At PE of 16x (which is the port operators' average multiple) that would push MMC valuation to RM9.6bil or RM3.15 per share. At a similar PE of 22x as Westport (which is fair given that MMC is actually the no1 operator of ports in Malaysia and Westport No 2. And at the same time earning growth expectation of MMC's port is higher vs Westport's), that would translate to a market capital of RM13.2bil or RM4.33 per share.

Hence why I believe the upside of MMC is a lot higher than what the market currently assumes. DBS Bank (Singapore) did highlight this in their March 2021 analyst report which for them is the biggest rerating catalyst for MMC.

Thanks emsvisi. Totally agree. We actually have seen that in 4Q20 when volume of Northport increases due to ships deciding to go to Northport instead of both Singapore and Westport which were both congested.

The current situation of congestions still remains i believe. We will see in 1Q21 result if Northport benefited again from this congestion.

Yeah. MMC should at least trade at price above RM2. Prior to the Trumps announcement of a trade war with China back in end 2017, MMC was actually trading at between RM2.30 and 2.70 and this is with lower profit level than what it is expected to achieved in FY21.

So yes, MMC is really undervalue at the moment which it shouldn't be given all the positive catalyst lining up for them in FY21 and FY22.

Apart from the better industry outlook (both in their port and construction businesses) which will lead to better financial performance in fy21, another catalyst that investor need to take seriously is the monetisation of MMC's port business most probably via IPO.

Analysts are expecting a busy pipeline in the ipo market as highlighted in the satar most recent article: https://www.thestar.com.my/business/business-news/2021/04/19/stronger-pipeline-to-boost-deal-flow

MMC initially wanted to list the port business back in 2018. Prior to the IPO management had decided to bulk up its portfolio exercise with a slew of ports acquisition. 3 acquisitions were completed in 2017: NCB Holding Berhad (operator of Northport), Penang Port and Port Tanjung Bruas. They even wanted to acquire Sabah Port Sdn Bhd the operator of 5 ports in Sabah which is owned by Suria Capital but that deal did not materialised due to a higher valuation wanted by Suria Capital. Prior to all these acquisition MMC was actually only operating 2 ports PTP and Johor Port.

All this was to give access to investors for a pure play leading port operator in Malaysia with a bulk of the earnings coming from PTP. Growth in earnings will still come mainly from PTP but will be complemented by the improved in financials of the newly acquired ports.

However the ipo was canceled due to various issues primarily the trade war started in 2018 by president trump which had affected the performance of its ports but also the deterioration of investors demand for bursa listed companies after the surprising outcome of GE14. Investors confidence especially foreign investors was at a low point back then which means any port listing will not gives MMC the valuation that it was seeking.

Now with improved port activities (as shown in 4q20 result) and high market demand for ipos, it make sense for MMC to try to list it ports this year hence why there were rumours that the company is looking to list it by end of this year with expected capital to be raised at around rm4 bil valuing the port business at around rm10 bil ( assuming a 40% stake sale as mmc will still want to have controlling interest in the business).

This means that the port business alone would be valued at rm3.30 per share.

Yeah agree. Have to be patient a bit with MMC. A lot of people still have yet to see the value and growth potential for the company. Most are looking elsewhere for recovery play investment which has push some of the share price at ridiculous valuation.

MMC being the leading port operator in Malaysia (and top 10 globally) will actually benefit directly from the rebound of major economies which itself will see better trading activities. Ports being the gate for import and export trade are one of the first to feel the effects of any pick up in economic activities.

We actually already seen it in 4Q20. Expect to continue through out FY21. Hopefully by then market would put a fairer valuation to MMC rather than a mere 6x fwd PE.

Suria Capital, which is the smallest listed port operator in Bursa and is the operator of Kota Kinabalu port already command a fwd PE of more than 10x (premium of 60% vs MMC). Westport the 2nd largest port operator in Malaysia commands a forward PE multiple of more than 20x (230% premium vs MMC).

Lets wait for 1Q21 result. It should show significant growth improvement vs last year result.

An article relating to the announced potential tender of MRT3.

https://www.thestar.com.my/business/business-news/2021/04/14/new-mrt3-details-could-offer-more-upsides

The analyst mentioned that Gamuda will be the obvious beneficiary of the project. Even mentioned other companies like Kimlun, IJM and MRCB. The analyst just seem to forget that Gamuda exposure to MRT3 will be via MMC-Gamuda ventures. MMC owns 50% of the venture which is the same as Gamuda's.

In term of % value increment to companies, MMC actually has a higher % exposure to MRT3 vs Gamuda given that the market cap of MMC is only RM3.2bil vs Gamuda's RM9.0bil (mainly due to MMC forward PE of only 6x vs Gamuda fwd PE of 17x)

Joshua,

I don't think MMC falls under the "goreng" stock. Most that bought into this company will probably falls under the "value investors" category more than momentum investors.

If you look at the recent top 30 investors list in FY20 Annual report, you will see that there are now a lot of foreign funds that have been buying shares of MMC. They did not have any position in MMC previously. Below are some of the new foreign funds. Most of them normally uses value/ growth investing strategy rather than momentum trading. You can check their website to see the explanation

JP Morgan
UBS AG
Eastpring Investment
State Street Corporation
California State Teacher Retirement System
Mackenzie Emerging Market
Universal Investment Gesellschaft
WisdomTree
Florida Retirement System

MRT3 tender expected in August. Refer link.

https://www.theedgemarkets.com/article/mrt3-tender-expected-august-says-mrt-corp

As mentioned previously, MMC-Gamuda has been the main contractor for MRT1 and MRT2. MRT3 will need a lot of tunneling works which bode well for MMC-Gamuda given that the company has a total of 12 boring machines that it had deployed in the MRT1 and MRT2 projects. They can easily redeploy the same machine for the MRT3.

Some analysts has already assume MRT3 project in Gamuda valuation report. Surprise that they did not do the same for MMC. This company is really receiving anak angkat treatment from analysts.

Actually the 887 acres are only the lands that are up for sale.

But if you refer to the 2020 Annual report page 308, you would see that the total size of the Senai land for the development is actually 827 hectare or 2,043 acre. MMC is carrying this land at RM1.35bil in its book or at RM0.7mil per acres.

The price of the recent announce disposal land to Shengda New Energy and the other E&E companies were transacted at RM2.17 mil per acre. This would value the total land for development of Senai Airport City at 2,043 acres x RM2.17mil = RM 4.43 bil. This would translate to RM1.46 per share.

So yes. MMC is really undervalue. The land of Senai alone is well above the current market price.

Anyway, i do agree with u that mmc is really super undervalue when compared to the assets it holds and even when compared to its other peers.

Pigdan,

Slight error on ur statement below:

3) Port assets - assuming they listed their port. According to Bloomberg, they able to list their port on USD1billion, equivalent to RM4.15billion, which is 1.27times of MMC's current market value.

They are not looking to list the port business at valuation of usd1bil. They actually want to raised from ipo usd1bil. The port valuation will depend on how much stake they are wiling to sell to raised that amount. Assuming they still want control of the port business, let say mmc is willing to sell 40% during ipo in order to end up with a controlling stake of 60%, that would value the port business at usd2.5bil or rm10bil (or around rm3.30 per share)

Below is an article on the potential ipo:

https://themalaysianreserve.com/2020/10/23/mmc-mulls-reviving-rm4-2b-malaysian-port-assets-ipo/