MMC's Senai Airport City in 60-year land-lease deal with Japan's Fuji Oil By theedgemarkets.com / theedgemarkets.com | September 28, 2015 : 1:40 PM MYT
We believe MMC Corporation’s (MMC) move to privatise NCB enhances its ports portfolio. However, it comes at a heavy price tag. In the longer term, MMC would be able to consolidate its position as a key player in the ports industry and capture better operational synergies. In the short term MMC would have a more leveraged balance sheet and incur higher finance costs.
MMC to trigger MGO for raising stake in NCB
Yesterday, MMC announced it intends to acquire a 53.4% stake in NCB from Permodalan Nasional Berhad and AmanahRaya Trustees Berhad for RM1.1bn (RM4.40/NCB share) via debt. This would bring MMC’s stake in NCB from 30.1% to 83.5% thus triggering a mandatory general offer (MGO). MMC does not intend to maintain NCB’s listing status.
Valuation does not appear cheap
The potential privatisation of NCB will not come cheap to MMC. At RM4.40/NCB share, MMC is valuing NCB at PE of 55x (or EV/EBITDA of 12.3x) based on annualised 2015E EPS of 8 sen. In comparison, Westports’ currently trades at 2015E PE of 26x. If the MGO is successful, MMC would acquire the remaining 16.5% in NCB at an additional cost of RM340m. Nonetheless, we believe NCB’s future earnings may improve from rising container throughput and potential container tariff revisions. Strategically, NCB would increase MMC’s presence in the central region of Peninsular Malaysia as MMC’s ports are located in Johor.
Potential earnings erosion to MMC
We believe MMC’s 2016E earnings may erode by 6.5%, as we estimate the higher finance costs from issuing debt of RM1.44bn to privatise NCB will outweigh the consolidation of NCB’s earnings while assuming a conservative 5% growth to NCB’s annualised 2015E earnings. Assuming an interest rate of 5%, MMC would incur RM54m in additional after-tax financing costs vs. NCB’s annualised 2015E earnings of RM37m. MMC’s gross debt/equity will increase from 0.8x to 0.95x from this privatisation exercise. NCB has a fairly small net debt position of RM79m.
Maintain BUY with unchanged TP of RM2.60
We maintain our BUY rating on MMC with an unchanged RNAV-based 12- month target price to RM2.60 for now. NCB’s earnings contribution to MMC will still be less than 10% even if NCB is privatised. Key re-rating catalysts for the stock include further clarity on tunnelling works for MRT 2, sustained recovery in associates (Malakoff and Gas Malaysia) and winning new construction projects (such as high-speed rail) and/or concessions.
Accumulated few lots at rm2.04, Suria is just controlled Sabah port and price is rm2.55 but MMC is controlled 3 ports in West Malaysia but at rm2.04? (Just skip the property).
If want to compare mmc outstanding shares is 20x more than suria, nine months makes a lot of money, it comes from selling assets. Last lowest price is 1.60 so be careful...
Following the completion of the Proposed Acquisition, MMC Port’s shareholding in NCB has increased from approximately 30.13% to approximately 83.55% of the issued and paid-up share capital of NCB. NCB is now a subsidiary of MMC Port.
MMC Corporation Berhad (“MMC” or “the Company”) wishes to announce that it had on 1 December 2015 entered into a Shareholders Agreement with Keretapi Tanah Melayu Berhad (“KTMB”), to regulate their rights as shareholders of a joint venture company (“JVC”) to be incorporated, which will jointly identify potential opportunities and undertake the business of rail freight transport and related businesses in the rail cargo sector. http://www.bursamalaysia.com/market/listed-companies/company-announcements/4938673
Even enquired the NCB caused the debt or gearing up but overall NCB will become a cash cow to MMC. The worry is more on it property business. The JV with KTMB is a positive move for long term.
Masked rider..false alarm..this stock operator very cunning indeed! Control price like crazy..if u spend 5 full trading days watching this stock from 9am to 5pm you will get what i mean..
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
derrtan
1,796 posts
Posted by derrtan > 2015-08-24 14:34 | Report Abuse
may i know what cause this counter tumble a lot other than the market sentiment itself?