Period  3Q13/9MFY13

Actual vs. Expectations MMC’s 9M13 net profit of RM187.7m accounts for 67% and 62% of ours and consensus estimates respectively. We deem the result as broadly within our expectation as we estimate most of MMC’s full year FY13 earnings to be delivered in 4Q13.

Dividends  None.

Key Results Highlights QoQ, net profit jumped by more than 2 folds mainly attributed to part of the major maintenance works in Tg Bin Power plant which has already completed and hence better margins.

 YoY, 3Q13 net profit doubled due to low-base effect following its construction division was making losses in 3Q12 dragged by additional construction costs incurred from the ‘Double Track’ project.

 YTD, core net profit is flattish at RM187.7m (+3%) and was driven by Malakoff, ports and its associates MMC:Gamuda JV. With upgrading works of Tg Bin plant in Johor being almost completed, we believe our profit forecasts for this year will likely to be met.

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

 M&A activities in the pipeline? We gather that MMC is currently looking to acquire strategic assets. It is widely speculated that MMC is currently in negotiation with the government to acquire KTMB. In addition, local newspaper has recently reported that MMC could be looking to spin-off its transport logistics division namely PTP and Johor Port.

Change to Forecasts Maintained as the results is in line.

Rating Upgrade to OUTPERFORM We upgrade MMC to OUTPERFORM from MARKET PERFORM rating after we factored in its 2600 acres Johor land value into our SOP. We gather that MMC is looking to dispose these lands in the near-medium term.

Valuation  Our TP is revised up to RM3.60 from RM2.70 after we impute in value of its huge landbank in Johor.

Risks  Delays in MRT works

 Further delay in Malakoff listing

 Rising building materials prices

Source: Kenanga