MMC Corp; Buy
Price Target: RMRM3.60; MMC MK

MMC Corporation Berhad (MMC) announced that it has been informed by Jazan Economic City Land Co. Limited (JECL), a 50% joint venture with the Saudi Binladin Group (SBG) that the rights of MMC and SBG as the developer of Jazan Economic City in the Jizan Province, Kingdom of Saudi Arabia had been terminated with immediate effect. This was supposed to be a US$30bn development to also nurture nonoil based industries. According to the announcment, the termination was as a result of circumstances which gave rise to several difficulties that interrupted the progress of the Project.

We understand this was not a surprise for MMC and with this anticipated, the group had stopped commiting investments there for more than a year. So far, c.RM100m or RM0.03/share has been invested and the group remain confident that their investments will be protected. We view this piece of news as non-event for the group. Nonetheless, MMC will be engaging advisers to advise on matters relating to the termination and compensation.

We reiterate our BUY rating on MMC and TP of RM3.60/share based on a 20% discount to our SOP value of RM4.50.

Source: HwangDBS Research - 9 Apr 2013