News  MISC announced that they have entered into Agreement for Sale and Purchase of Shares with

MMCV and MMC for the disposal of 15.7% equity interest held by MISC in NCB, comprising 74.0m ordinary shares for a total cash consideration of RM222.0m on the basis of off-market Direct Business Transaction.

 The deal amounts to RM3.00/share, which is at 14.1% premium to NCB’s last closing price. This is also implying c. 1.0x PBV valued based on latest BVPS of RM3.00/share.

 The disposal is consistent with MISC’s intention to divest its non-core, non-energy related investments. In the past two years, the group has exited from its struggling liner shipping business and integrated logistics business.

Comments    The deal, in our opinion is mildly positive for NCB given that the offer price by MMCCORP is at a premium to its last closing price, signalling the buyer’s positive outlook on NCB. However, no earnings impact will arise from the deal.

 Post the completion of the deal, MMCCORP will emerge as a substantial shareholder of NCB but the question of the extent of the emergence of new shareholder adding value to the company remains as they are still not able to influence the future strategic direction of NCB given that they will not be the largest shareholder.

 The ultimate intention of MMCCORP remains unclear to us for the moment. Given that the group also owns several port assets namely Port of Tanjung Pelepas (PTP) and Johor Port, we do not discount the possibility of injection of MMCORP’s port assets into NCB. This could be a positive catalyst for NCB with potential synergies to be realised between NCB and PTP due to their different client base.

Outlook  In addition to the completed Wharf 8A, upgrading works on Wharf 8 will soon be initiated to cater for larger container ships owned by larger shipping lines. This could potentially unlock the full potential of Wharf 8 and 8A to cater for transhipment cargoes. Notwithstanding, we remain cautious on the container throughput growth outlook in the near term.

Forecast  We maintain our earnings forecast and assumptions for now.

Rating UNDER REVIEW pending more clarification from an analysts’ briefing.

Valuation  UNDER REVIEW. Our earlier TP was RM1.83.

Risks to Our Call (i) Faster than expected recovery in container throughput

 (ii) Earlier than expected completion in upgrade works

Source: Kenanga