By Stephanie Jacob
Currently trading at a 20% discount to its SOP value and around the lowest it has been in two years, MMC Corp presents an interesting case for those looking for a large cap stock. However its political links could be a boon or a bane, depending on the political climate.
Business model: MMC Corporation Bhd (MMC Corp) can trace it beginnings back to London in 1911 when the Malayan Tin Dredging Limited company was founded. In 1976, the group moved to Malaysia and was incorporated as Malayan Tin Dredging (M) Berhad. The next year in July, it was listed on Bursa Malaysia. In 1981, it merged with New Tradewinds Sdn Bhd, and became the Malaysia Mining Corporation Bhd in 1981.
MMC Corporation Bhd (MMC Corp) is a utilities and infrastructure group with diversified businesses under three divisions. They have an energy and utilities segment, a ports and logistics segment, and an engineering and construction segment.
The group can boast of having some of the largest projects in Malaysia. According to its website it operates Malaysia’s largest container terminal and multipurpose port. The Port of Tanjung Pelepas (PTP) is Malaysia’s busiest container terminal and presently ranked as one of the 20 largest container terminals in the world. It also operates the Johor Port which is a multi-purpose port and the only one south of the peninsula.
It is also the largest independent power produced through its subsidiary Malakoff Corp Bhd in Peninsula Malaysia and is the sole supplier of natural gas through Gas Malaysia Bhd to the non-power sector. MMC is also one a key player in Malaysia’s largest ongoing infrastructure project, the Klang Valley MRT.
Shareholders and management: MMC Corp’s largest shareholder is Seaport Terminal (Johore) Sdn Bhd which has a 51.76% stake, which is held by Seaport’s parent company, Indra Cita Sdn Bhd. This stake belongs to tycoon Syed Mokhtar Albukhary.
The second largest shareholder is Skim Amanah Saham Bumiputra with a 20.28% stake. While Lembaga Tabung Haji has a stake of 5.97%, coming in as the third largest shareholder.
The group’s Managing Director is Che Khalib Mohamad Noh, who is also managing director of Malakoff. He brings with him eight years of experience in the utilities business from his tenure as the president and chief executive officer of Tenaga Nasional Bhd (TNB).
Share performance: According to Bloomberg, MMC Corp has been trading in 52-week range of RM2.15 to RM2.87. The group has a market capitalisation of RM6.6 billion.
It has a one-year return rate of -11.18%, and therefore has underperformed the FBM KLCI which has a return rate of -0.87%. According to Reuters, the group has a beta coefficient of 0.85, and is therefore trading below the overall market volatility. A value of 1.0 reflects the average volatility of the stock market.
What analysts think: According to Reuters, out of the six research houses which cover MMC Corp, the majority have an outperform call with three houses taking that view. One has a buy call, while two others have a hold call on the counter.
Earnings forecast:
StockStalk: On Jul 31, 2015, MMC Corp closed trading at RM2.19. However analysts believe there might be significant upside to that price. Note that the three research houses followed by KINIBIZ have target prices which range from RM3.00 to RM4.95. Alliance DBS which has set the RM4.95 target price opined that MMC Corp share price could have a 117% upside. But even at RM3.00, MMC Corp could potentially have decent upside of 36% to its current share price.
Much of this untapped value comes from potential listings of its diverse portfolio. MMC Corp has done this in the past with Gas Malaysia and Malakoff. According to Alliance DBS, based on this two past listings, the market has assigned a value of RM2.3 billion to its unlisted assets. It is widely expected that MMC Corp will look to list its port facilities next. Furthermore as Malakoff’s contribution to the group continues to improve, MMC Corp will be able to bolster its earnings performance as well.
MMC Corp is currently trading at a 20% to its sum-of-parts (SOP) value and is also trading at the lower end of its 52-week range. It is also trading close to the lowest it has been at over the past two years, which perhaps presents an interesting opportunity for investors interested in investing in a group with a diverse portfolio.
It is important to note that this is a heavily linked political counter given the Syed Mokhtar connection. This can be seen as both a pro and a con, because while those ties would usually be positive for any company, it is worth considering that the group is also susceptible to political headwinds.
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Important Note and Disclaimer: This article should not be taken as a cue to either buy or sell the stock. The intention is to highlight the key factors you might want to think about before plunging in or scrambling out. While KiniBiz makes every endeavour to ensure facts are right and opinion is fair, no liability can be assumed for anyone relying on this information. In other words let the buyer (or seller) beware — a reflection of Bursa Malaysia, we say.
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