MMC  Corp  Bhd  is  believed  to  be  in  talks  with  MISC  Bhd  to  buy  the latter’s 15.73% equity stake in loss-making NCB Holdings Bhd. Based on yeterday’s  closing price of RM2.33, MISC’s 73.99m shares in NCB are  worth  RM184.8m.  The  negotiation  is  already  at  advanced  level, according to sources familiar with the matter, and a deal is expected to be  sealed  soon.  NCB’s  main  assets  are  Northport  (M)  Bhd  and  ailing hauling company Kontena Nasional Bhd. (Source: Financial Daily)

Comments:  Given  that  MMC’s  gearing  is  already  quite  high  (gross gearing:  3.5x,  net  gearing:  2.9x),  we  would  be  surprised  to  see  MMC embark on another acqusition exercise. However, NCB may be used as a  backdoor  listing  of  Syed  Mokhtar’s  port  business  (Port  of  Tanjung Pelapas in Johor and Penang Port), which suggests that MMC’s gearing could  remain  contained.  In  any  case,  the  acqusition  could  be  funded with minimal debt as MMC Corp is estimated to have RM200m cash at the  holding  company  level.  Having  a  stake  in  Northport  would  be positive for MMC strategically, as MMC does not have a presence in the central region of Peninsular Malaysia. At this juncture, we maintain BUY on MMC with an unchanged PT of RM3.15.

Source: Affin Hwang Capital Research - 25 Nov 2014