MMC Corp; Buy
Price Target: RM3.60; MMC MK

MMC has announced it is defering the listing of Malakoff from 2Q13 to no later than 1H14 in view of the following developments:
(i) the Tanjung Bin power plant will be undergoing major maintenance works which are expected to be substantially completed by 2H2013; and
(ii) potential positive outcome of certain growth opportunities currently being pursued by Malakoff which may, among others, increase the effective power generation capacity

We are neutral on this piece of news. Our view on the listing of Malakoff remains – it is positive for MMC’s balance sheet and will remove RM15bn of debt reducing gross gearing to 0.6x from 2.1x now. Assuming MMC’s stake drops to 35% from 51% currently, the interest savings could lift FY14-15F EPS by 8-10%. Also, the delay could result in a higher valuation for Malakoff if some of the growth opportunities materialise.

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 - 13 May 2013