3Q15/9M15
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.
None as expected.
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.
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.
No revision in earnings.
Maintain OUTPERFORM
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.
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
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