News

MMCCORP has extended a mandatory general offer (MGO) to acquire all the remaining 77.4m NCB shares (16.5%) not already held by it with an offer price of RM4.40 per share.

The MGO was triggered after NCB’s major shareholders, Permodalan Nasiaonal Berhad and Amanahraya Trustess Berhad (PNB) agreed to sell their 53.4% stake to MMCCORP at RM4.40/share, lifting MMCCORP’s stake in NCB to 83.6% from 30.1%, above the 33% threshold.

Offer price of RM4.40/share represents premium of approximately 1.4%, 2.6%, 6.3% and 18.6% over the 5-day,1-month, 3-month and 6-month VWAP of NCB share price.

Comments

We were surprised as we had downplayed the chances of the MGO due to the high gearing of MMCCORP. MMCCORP has previously acquired a 30.1% stake from three parties, starting from MISC (15.7% at RM3/share), Port Klang Authority (5.3% at RM3.45/share), and KWAP (9.1% at RM4.37/share). The latest acquisition from PNB cost RM1.1b or RM4.40/share for the 53.4% stake.

However, we are positive on the MGO as the offer price of RM4.40/share is higher than our Target Price of RM4.05, based on 1.3x PBV FY16E. Thus far, the 83.6% stake accumulated by MMCCORP cost RM1.6b or RM4.07/share.

We advocate investors to accept the offer as we think the offer price is a good price for minority shareholders, which translates into FY16E PER of 37x, which is 41.2% higher than nearest peer, WPRTS’s valuation and PBV of 1.4x (above +1 SD over 5-year mean). This deal offers the minority shareholders a chance to exit NCB, which is bracing for challenges in both port operations and logistics divisions.

Outlook

Moving forward, we expect a challenging outlook for its logistics division due to the slowdown in oil & gas activities and infrastructure construction activities. Meanwhile, the port operations division is also expected to face headwinds in view of the uncertain and volatile global economy outlook.

Forecast

We made no changes to our forecasts.

Rating

Rating

Our rating on NCB is now ACCEPT OFFER from UNDERPERFORM previously.

Valuation

Our Target Price is raised to RM4.40 (from RM4.05), inline with the MGO price.

Risk

NA

Source: Kenanga Research - 20 Oct 2015