MMC is buying Kumpulan Wang Persaraan’s (KWAP) 9.08% stake in NCB Holdings Bhd for RM186.5m cash or RM4.37 per share.  Upon completion of  the  acquisition,  MMC’s  stake  in  NCB  will  increase  from  20.15%  to 30.13%.  NCB  owns  both  Northport  (M)  Bhd  and  Kontena  Nasional  Bhd. MMC  said  the  consideration  of  RM4.37  per  share  was  arrived  at  after taking  into  account  the  closing  price  of  NCB  of  RM4  on  14  July,  which entails a premium of 9.25%. (Source: Bursa)

Comments: We are mildly positive on this development, as while acquiring a larger stake in NCB allows MMC to have a more meaningful stake and higher control over NCB, the impact to MMC’s overall earnings will likely be small. Nonetheless, having a larger stake would help to incentivize MMC to boost  Northport’s  growth  potential  which  we  understand  is  currently relatively  underutilised  (operating  at  roughly  half  of  overall  capacity).  We reiterate  our  view  that  having  a  stake  in  Northport  would  be  positive  for MMC  strategically,  as  MMC’s  ports  (Port  of  Tanjung  Pelapas  and  Johor Port) are located in Johor, and MMC previously did not have a presence in the central region of Peninsular Malaysia  prior to NCB.  No change to our BUY rating on MMC with TP of RM3.15.

Source: Affin Hwang Capital Research - 16 Jul 2015