MMC CORPORATION BERHAD

I am here to answer one question. Why MMC?

1) 30.9% GASMSIA + 37.6% MALAKOFF = MMC

2) Top10 largest port operators in the world

3) USD$1billion listing plan from the port business

4) Undervalue valuation compare to Westport

5) Possible new contract received from infrastructure project from government (MRT3, HSR, RTS, Pan Borneo etc)

6) First interim dividend since 2002

7) Significant increase in demand of container lead to increase in port income

MMC CORPORATION BERHAD is a leading utilities and infrastructure Group with diversified business under four divisions, namely Ports & Logistics, Energy & Utilities.

Based on annual report for financial year 2019

a) Revenue generate from:

Ports and logistic 75%

Engineering 22%

Others 3%

b) EBITA generate from:

Ports and logistic 72%

Engineering 24%

Others 4%

1) 30.9% GASMSIA + 37.6% MALAKOFF = MMC

One of the simplest way to value the company is see what is the value of shares the company owned. MMC CORPORATION BERHAD owned two listed company, namely Gas Malaysia Berhad and Malakoff Corporation Berhad. The total market value owned by MMC CORPORATION BERHAD when i was writing was 2.77billion, which is slightly less than the market value of MMC CORPORATION BERHAD (2.817billion). This means that the Ports & Logistics, Energy & Utilities you bought is only cost RM47million. (WTF??)

2) Top10 largest port operators in the world

Based on MMC CORPORATION BERHAD annual report 2019, the group are one the 10 largest port operators in the world. The port operations in Malaysia for the group are Pelabuhan Tanjung Pelepas Sdn Bhd (70%). Johor Port Berhad (100%), Northport (Malaysia) berhad (99.1%), Penang Port Sdn Bhd (100%) and Tanjung bruas Port Sdn Bhd (100%). The group is also a port operator in Saudi Arabia (Red Sea Gateway Terminal Company Limited) at Jeddah Islamic Port, which is second largest and busiest port in Arab World after Port of Jebel Ali in Dubai. Currently this only cost 47million in term of market value (so cheap??)

3) USD$1billion listing plan from the port business

https://www.bloomberg.com/news/articles/2020-10-22/mmc-said-to-mull-reviving-1-billion-malaysian-port-assets-ipo

According to one of the news from Bloomberg, MMC plans to list their port assets from US$1 billion, which is around RM4billion. Let say the whole port assets worth RM4billion, if MMC listed 50% of their port assets, which is RM2billion, what the company will use the RM2billion for? Special dividend? This is worth around 65sen per shares, which is around 60++ percent of current market!!! Now u only pay RM47million for this??

4) Undervalue valuation compare to Westport

Next thing we try to compare to the same industry. Lets check with our biggest port in the Malaysia, Westport.

Westport

PE24.34 Dividend yield 2.82% Profit after taxation margin 38.45%

Net assets RM0.78

MMC

PE10.72 Dividend yield 6.42% Profit after taxation margin 5.36%

Net assets RM3.08

From the facts shown above, cannot deny that Westport have a far superior profit after taxation margin. However, the valuation for Westport have already received PE24.34 and dividend yield at 2.82%. However for MMC, the PE ration still at 10.72 and dividend yield are high at 6.42% The huge difference in profit after taxation for Westport and MMC are due to finance cost. If the group listed their port business, I might help the group to payback the loan and reduce the finance cost for the group.

5) Possible new contract received from infrastructure project from government (MRT3, HSR, RTS, Pan Borneo etc)

https://www.nst.com.my/news/nation/2020/11/642400/budget-catalyst-construction-industry-growth#:~:text=KUALA%20LUMPUR%3A%20The%20RM7.,for%20the%20nation's%20economic%20growth.

Yes budget 2021 have passed!!! According to the news above, RM7.35billion have allocate for works minstry. As one of the main infrastruction construction company in Malaysia, MMC surely will beneficial from this allocation. As per the time I writing this, I am not sure on how much it will goes to MMC. We just wait and see the annoucement from the government on how much MMC will get from the infrastruction contact.

6) First interim dividend since 2002

Yes, yes, yes!! For the first time since 2002, MMC have declared a surpise interim dividend!! This is one of the good sign bring out by the manangement that the company cash flow is healthy for the company. Will that be more interim dividend come out during next 2 quarters? Time will tell..

7) Significant increase in demand of container lead to increase in port income

https://finance.yahoo.com/news/container-shipping-booming-again-probably-143323455.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAADInfvzd-nG0y_cXSfXkFQQ7ccJPnlu2y6oLE6Tz_y-ptMys09ThneO_ogsPM393lHpO5nVITck-oVs9vYq4DAFUkAse-PGVrtNMWbTHBelYFJdlDZSM3YdhqIJA4OlP9I4GDG-VlYufzmpqeV9fKO9dAvDlyaQt6pvAtYYUOrpj

I put this point as my 7th point as I am not very sure on the impact on this. Based on the news from Yahoo (or you can google on container price), due to pandemic, alot of current cargo traffic is just catch-up from the shipping interruptions of the early days of the pandemic. Hence the volume of import and export will definitely increase. I am not sure whether the port charges will be increase or not. If you have any news or information on this, please leave it on the comment section. 

Thank you for your times.

Please feel free to leave a comment below.

Disclaimer: The aritcle written for sharing purpose. It do not represent any buy or sell call. Please do your research before any investment!!!