INVESTMENT HIGHLIGHTS

• Concession extended for 30 years

• Interim privatisation agreement was previously signed

• No changes to our valuation

• Maintain BUY with unchanged TP of RM2.72 per share

Concession extended. On 6th March 2018, MMC Corp’s subsidiary, Northport (Malaysia) Bhd (NMB) entered into a new privatisation agreement (NPA) with the Government of Malaysia (GOM) and Port Klang Authority (PKA). The NPA granted NMB a further 30-year concession to operate North Port and South Port in Port Klang from 1st December 2013 to 30th November 2043.

Interim privatisation agreement was signed four years ago. To recall, the port concession for NMB expired on 30th November 2013. NMB later signed an interim privatisation agreement with the GOM and PKA on 28th March 2014 to manage port activities until a NPA was signed yesterday. Hence, there is another 26 years left before the concession ends.

No changes to valuation. This concession extension has a retrospective effect from FY13. The company was confident (as stated in its annual report FY16) that the NPA would be approved and has implemented NMB’s amortisation policy of intangible assets on the basis that NMB will continue to manage port activities over the expected concession period of 30 years since November 2013. We have previously factored this into our model hence, no changes are made in our valuation for NMB.

Maintain BUY with unchanged TP of RM2.72 per share based on our sum-of-parts (SOP) valuation. Our BUY call is mainly predicated on: (i) potential listing of its ports assets, (ii) expected synergies from full acquisition of Penang Ports and (iii) healthy construction order book of > RM10b.

Source: MIDF Research - 7 Mar 2018