Period  1Q13

Actual vs. Expectations  MMC’s 1H13 net profit of RM52.7m accounts for only 18% of our and consensus estimates respectively. Nonetheless, we deem the result to be within our expectation as we expect the bulk of MMC’s full-year FY13 earnings to be delivered in 2H13.

Dividends  There was no dividend declared in 2Q13.

Key Results Highlights  QoQ, net profit rose tremendously by almost 4 fold to RM43.9m due to low base effect and tax exemption. 1Q13 earnings was hit by higher minority portion while in 2Q13, MMC received tax exemption through a subsidiary. Operationally, the Group registered RM766.6m EBITDA which rose strongly by 42% as compared to 1Q13. This is mainly attributed to higher E&U division (i.e. Malakoff) revenue.

 YoY, 2Q13 net profit plunged by 94%, due to high-base effect following deconsolidation of Gas Malaysia Bhd (June 2012).

Outlook  Going forward, post-listing of MMC’s bread and butter Malakoff Corp in 1H2014, MMC will focus more on engineering & construction. In fact, the management is looking for RM1.0b new orderbook every year on top of its current outstanding orderbook of RM5.0b that will last until 2017-2018.

Change to Forecasts  Maintained as the results are in line. We understand its major maintenance works in Tanjung Bin will be finished before year-end and hence, expect better profitability in 2H13.

Rating   Maintain MARKET PERFORM

 We are maintaining our MARKET PERFORM rating on MMC as the share price is already fully valued. We will re-rate the company if there are fresh catalysts.

Valuation  We are maintaining our TP of RM2.67 based on SOP valuation.

Risks  Delays in MRT works

 Further delay in Malakoff listing

Source: Kenanga