Period

3Q15/9M15

Actual vs. Expectations

MMCCORP registered core net profit (CNP) of RM149.0m for 9M15, making up 45%/43% of our/streets’ full-year estimates. However, the results are inline as we are expecting a strong fourth quarter in anticipation of higher earnings contributions from its associates due to the recovery in Tanjung Bin and also partial recognition of land sale/lease.

Dividends

None as expected.

Key Results Highlights

YoY, 9M15 net profit saw a huge four-fold jump to RM1.49b, attributable to the one-off gain from the listing of MALAKOF. However, excluding this one-off gain amounting to RM1.34b, the core net profit (CNP) would have been RM149.0m, relatively flattish compared to 9M14, albeit a sharp decline in revenue (-37%), as its port and logistics division, which registered pre-tax profit of RM262.0m (+36%) had performed extremely well, which help cushioned the negative impact from its other divisions, i.e. construction and energy.

QoQ, 3Q15 its core net profit grew by 7.7x to RM47.8m, mainly attributable to the improvements from its JVs and associate contribution (+71%) partly driven by the recovery in Tanjung Bin. That said, its engineering and construction division had also seen improvements with pre-tax profit growing by 20% to RM49.0m.

Outlook

Near-medium-term prospects remain intact. Post-listing of Malakoff, MMCCORP will continue to focus on its three growing core businesses, namely: (i) construction, (ii) ports and logistics as well as (iii) land sales in Johor. We expect MMCCORP to pay extra focus on its ports division as the acquisition of 53.4% stake in NCB has just become unconditional, bringing its effective stake in NCB up to 83.6% and MMCCORP is obliged to offer a MGO to the minority shareholders for the remaining 16.5% equity stake in NCB.

Forecasts

No revision in earnings.

Rating

Maintain OUTPERFORM

Valuation

We maintain OUTPERFORM on MMCCORP with a lower TP of RM2.86 (previously, RM2.87) which is based on SoP valuation, as we updated our valuation for MALAKOF. In the near-term, we believe that MMC will continue to realise its asset value through land sales. While in the longer term, we would be expecting MMCCORP to list its ports division in the next three years after acquiring NCB. Our TP implies FY16E PER of 26.8x, which is just slightly higher than its 5-year’s average Fwd-PER of about 25.0x.

Risks to Our Call

Below-than-expected new contracts assumption

Slower-than-expected construction progress

Delays/scrapped in MRT2 awards

Slower-than-expected port activities

Source: Kenanga Research - 26 Nov 2015