Offer to privatize MMC Corp as a prelude to port listing


After months of speculation, tycoon Tan Sri Syed Mokhtar Albukhary’s offer to take MMC Corp Bhd privately at RM2 per share has finally worked. Does this mean that the long awaited listing of the port business is imminent?

The talk of a possible listing reappeared at the end of last year. MMC had announced in 2017 that the port business – the group’s largest profit maker – would be listed on the stock exchange in 2018 or 2019, but the listing did not materialize.

An analyst for MMC agrees that the proposed privatization paves the way for the proposed port listing, but a corporate restructuring is required for now to maximize the value of its ports.

“The market is hoping for a better corporate structure and control, without transactions with related parties, in order to preserve the exclusivity of the port company, such as Westports Holdings Bhd,” he told The Edge.

He therefore does not provide for an immediate listing of the port business. In addition, the currently challenging market situation does not bode well for a listing.

“The management of MMC has always mentioned that the port list is still on the table. I believe that Malaysia’s largest port operator will be listed in the future, ”he notes.

Due to the current depressed valuations of MMC, another analyst considers a possible port listing to be plausible and financially sensible.

Ports operated by MMC in Malaysia include Pelabuhan Tanjung Pelepas, Johor Port, Northport, Penang Port and Tanjung Bruas Port.

Its shares in the port facilities are valued at 4.12 billion RM, slightly lower than the 4.26 billion RM for the energy and utility segment, while the engineering and construction segment is valued at 3.68 billion RM Kenanga Research.

MIDF Research suggests that the limited visibility of the group’s order book could be one of the factors that could result in an undervaluation.

“His order book visibility is only given until 1QGY2023, after the Langat wastewater project has ended. We believe that the highly anticipated MRT 3 (Mass Rapid Transit 3), for which MMC-Gamuda is still a favorite at the bid price, will be the catalyst for an upward valuation of the group, ”said a statement from last year Friday

Although the offer price is lower than the estimated asset per share of RM 2.74, the research house said it was a fair deal given MMC’s share price currently trading at a discount.

Kenanga also thinks this is an attractive exit price.

“Based on our estimate for the 2021 financial year, the proposed P / E ratio (price-earnings ratio) [for the] Acquisition is 16.4x, with a P / BV (price-to-book ratio) of 0.6x, giving premiums to the average historical one-year forward P / E of 10x and P / BV of Represents 0.4 times. “

MMC relisting feasible?

The port listing also shows that MMC may be listed again in the future, as the contribution of energy and utility companies as well as engineering and construction companies continues to be substantial. They contributed around 40% of MMC’s total pre-tax profit last year. The remaining 60% came from the port business.

However, one of the analysts believes that the idea of ​​resuming the group may not be viable. “We believe MMC’s ports are the group’s crown jewel. Therefore, in our opinion, it is not the most sensible step to list the ports and then list the group again. “

MMC’s shares hit a limit of RM 1.69 last Friday, giving the company a market capitalization of RM 5.15 billion. Still, there is an upward trend of 18.34% over the RM2 offer price. The share has been trading below RM2 since January 2018, with a low of 43 Sen in March 2020.

In the energy and utilities segment, MMC has stakes in two listed companies – 18.37% in Malakoff Corp Bhd and 30.93% in Gas Malaysia Bhd. Both stocks gained 1.2% and 0.7% respectively last Friday.

Malakoff is the largest independent power producer in Malaysia with an effective generation capacity of 5,836 MW from its seven power plants.

Gas Malaysia sells, markets and distributes natural gas and builds, operates and maintains the natural gas distribution system.

Meanwhile, the shares of Zelan Bhd, in which MMC holds 39.24% of the shares, rose 22.2% last Friday. In addition to engineering and construction, Zelan is active in the areas of asset and facility management as well as real estate and development.

MMC also owns and operates Senai International Airport in Johor.

Financial data has slowly recovered since 2017, with net income rising from RM 255 million in 2019 to RM 375 million in 2020.

In the last quarter, which ended on March 31, 2021, net profit doubled to 124.7 million RM, driven by higher handling volumes at Pelabuhan Tanjung Pelepas and Northport.

However, MMC’s gross debt increased from RM 9.77 billion at the end of December 2020 to RM 11.95 billion at the end of March, bringing the company’s net debt to RM 9.32 billion.

MMC was listed on Bursa Malaysia in July 1977 and was formerly known as Malaysia Mining Corp Bhd, which was once the largest mining company in the world. In 1983, the group stopped mining tin in Malaysia due to rising operating costs, low tin levels and declining global tin demand.

In 2000, Syed Mokhtar became a major shareholder in Malaysia Mining Corp. after purchasing 19.9% ​​of the shares in Permodalan Nasional Bhd. Since then he has expanded his participation in the group. The name change to MMC took place in June 2004.

Prior to the privatization offer, Syed Mokhtar held 51.76% of MMC.


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