Apart from the cheap valuation, there are also other positive catalysts that will benefit MMC in the near future.

1) better profit level mainly from the return of global trades from the reopening of major economics post covid and also the diminishing tariff war between major economies (US, Europe and China) with Biden as president vs Trump. MMC share price fell starting in early 2018 mainly due to Trumps's trade war with china that hampered global trades which affected cargo volume into MMC's ports.

2) Potential award of MRT 3 contract to MMC-Gamuda which is the main contractor for the current MRT2. MRT 3 would consist mostly of underground tunnelling works where currently MMC Gamuda is the only local contractor with the right expertise. The JV company has a total of 12 boring tunnel machines at its disposition ready to undertake the project. MRT3 contract value and margins are expected to be higher vs MRT2 given the complexity of the works.

3) Monetisation of the port business. As mentioned in local reports, there are rumours that MMC is looking to capitalised on the favourable market condition by raising around rm4bil via IPO. Assuming 40% stake is to be sold given that MMC would still probably want to have a controlling stake in the port business. This would mean a RM10bil valuation for the port business alone or rm 3.28 per share which would put MMC valuation closer to its rival Wesport.

With all this there are actually more catalysts for the share price to trend upward.

Most people did not take the back to back acquisition of the cruise business (announced last friday) and the property developer (announced on monday) that well. But these acquisitions are actually relatively small vs the group overall size. And both are actually strategic value accretive in the mid to long run. The affect to balance sheet would be minimal. For example the acquisition of Retro Highland is only expected to be completed in 3Q21. And payment will be made in 4 phases. In 2021 a total of rm100 mil, another rm100mil in 2022 and the last rm50 mil in 2023. So it would not affect the balance sheet that much.

The other thing to take note is that MMC is by far the cheapest port operator in Bursa. Assuming a profit of rm600mil in 2021, at the current price, it is only trading at around 5x PE. The closest competitor which is westport is trading at above 20x. Even the next cheapest port operator, Suria Capital, is trading at 10x PE. Another smaller port operator Bintulu Port is trading at a multiple of 20x PE. This is not normal given that MMC is actually the largest port operator in Malaysia with more than 21 mil TEU capacity annually vs Wesport of around 14mil TEU.

Pingdan,

Another thing to take note, the acquisition is free of all the existing liabilities as per explained by Ruben of Westport. Opportunistic acquisition by both MMC and Westport.


https://www.thestar.com.my/business/business-news/2021/03/19/boustead-sells-klang-cruise-terminal-to-westports-mmc

Beateo

The NTA does not represent the potential market value of the port business. It represent mainly the cost of acquisition of the business + retained earnings during the ownership (after deducting dividend etc).

For example if you acquire a business early of 2020 at 10x PE and the business generate a consistent profit of RM 10 mil in the previous years, you will be paying RM 100mil for the acquisition. Assuming profit is the same in 2020, at the end of the year, the NTA for the business in your balance sheet would be RM100mil (ur cost) + RM10mil (profit for 2020) = RM110mil. But let say suddenly the business environment change and the similar company can generate profit of RM20mil in 2021 and beyond. At the end of FY2021 the NTA for the company in the balance sheet would be RM110mil + RM20 mil (profit in 2021) = RM130mil. This does not reflect the true potential value that the company can achieve if you were to sell it to the market.
Assuming the market still value the same business at 10x PE, you could actually get RM200mil if you were to sell it to the market which is RM70mil more than the NTA in your balance sheet.

Anyway, you can actually see a real life example with MMC disposal of the Jeddah terminal. Based on the 2019 AR, the 20% interest in Red Sea Terminal Net Asset value in MMC book is only RM 185mil. But MMC is selling 8% of the interest for RM228mil. This would mean that the 20% interest is actually valued at RM570mil based on the market or 3x more than what is recorded in the Balance Sheet.

Hope that's clear.

Benteo,

The RM 4bil is actually the amount to be raised from the Port business IPO and not the market cap. If MMC were to raised the RM4 bil by "selling" 40% of its port business (assuming MMC still wants to control a majority stakes) then the market cap of the port business would be RM 10bil.

That alone is already 4x the current market cap. Still not included Malakoff, Gas Malaysia and the Engineering business. Mmc is really undervalue at the moment.

Hi Trending,

MMC is selling their 8% stake to Public Investment Fund (Saudi Arabia sovereign wealth fund) and COSCO Shipping (of China).

Westport and MMC are 2 different port operators. MMC owns Port Tanjong Pelepas, Northport (in Klang), Penang Port, Johor Port , Tanjung Bruas Port and a minority interest in Red Sea Gateway Terminal.

Westport operates in Port Klang.

The main advantage of MMC vs Westport is in the valuation. MMC is trading at less than 9x PE and 0.3x BV. Westports is trading at 24x PE and more than 5x PB.

MMC dividend yield is currently more than 7% (5.5sens = 1.5sens interim + 4 sens final). Would be higher if company decides to pay more given the better free cash flow that the company is having at the moment.

Westports yields stands at 3.3% based on a 14 sens dividend payment (they actually only pay 14 sens and above in FY16 and 17). In FY19 it was 13 sens.

kinuxian,

MMC is actually not just a covid recovery play, it also provides exposure to those who are seeking a global trade recovery once Biden is made President tomorrow. If you look at MMC share price, it started to fall aggressively at the end of 2017 when Trump made known to the world that he will be pursuing an aggressive trade war strategy with China ( the trade war actually started in 2018) and also with its other strategic partners like Europe. Basically he was pushing for America first strategy.

Market is expecting Biden to normalize back US strategy and promote more trades between US trade partners which will spur back global trades in general especially those in Asia.

That being said in 4Q20, ports under MMC has already seen high utilisation rates of more than 90% vs an average of 70% in FY19. So to say it has recover to Pre Covid is actually an understatement. In reality the current port activity has stated to return back to pre trade war level.

The other segment that was affected by the Covid was the Engineering division (construction of MRT2). This division is running normally even during the second MCO as it is categorise as strategic infrastructure project. I have verified this with friend that are working with MRT Corp.

Anyway, all this will be seen when MMC post its 4Q20 results next month.

https://www.theedgemarkets.com/article/volkswagen-sets-regional-parts-distribution-centre-tanjung-pelepas

This will increase future contena volume for PTP.

Most of MMC businesses (ports, construction, gas & energy) will not be affected by the recent announced PKP. I believe govt would want to minimise any impact on the economy. The PKP seems to be targeting more on the general public. The only sectors that will be heavily affected would probably be retails and travel.

Hope it will be just a 2 weeks PKP..

Fachoi, they normally announce their dividend in april. For 2019 dividend they announced it on 10th Apr 20. For 2018 dividend, they announced it on 29th apr 19.

For 2020, they announce a 1.5 sen interim dividend on 25th Nov 20. But i would assume the final dividend for 2020 to be announce later in Apr. If the maintain a payment of 4 sens then total dividend for 2020 would be 5.5 sens. At current price, that's a dividend yield of 6.8%.

Wow...thx monorail...where did u get the info? 4Q20 result must be really good..

It must be due to the optimisation initiatives that they did early of the year. Below an extract of an article i found in The Star:

Early in 2020, Tanjung Pelepas Port made moves towards becoming the region’s most technologically advanced port by deploying Portchain’s Berth Optimisation Engine as part of its digitalisation journey. The port launched the technology to optimise its berth planning operations, thereby increasing berth productivity and reducing operating costs. With Tanjung Pelepas in position, other major ports can follow suit to become the best-equipped and most technologically advanced ports in the region.

Either way, MMC does not really have any direct exposure in HSR. Current engineering project are mostly from MRT2 (under the 50% JV with Gamuda).

The main contractors for the HSR that was being awarded prior to the general election were 2 consortiums, MRCB- GAMUDA and YTL- TH Properties.

For me the cancellation does not really affect MMC future earnings in any way.

I would focus more on the revival of MRT3. If this happen, it would potentially benefit MMC since it is already the main contractor for the MRT2 project.

But still, the main value for MMC is their port business of which they are the largest port operator in Malaysia. Westport, the second largest, command a PE 22x. MMC is currently trading at below 10x.

Here is the news article on the potential IPO

https://www.theedgemarkets.com/article/mmc-mulls-reviving-us1b-port-assets-ipo-%E2%80%94-sources#:~:text=MMC%20owns%20ports%20including%20Pelabuhan,Lumpur%2C%20according%20to%20its%20website.

True pinky that MMC is a conglomerate.

But just look at the profit contribution of MMC. Most of it comes from the port and logistic segment. And even if you do an Sum of Part valuation (SOP) and u assign the same multiple as Westport for the port division, you will get a value that is a lot higher than the current market cap.

FYI, the biggest port player in Malaysia is MMC with capacity of 21.3mil TEU vs Westport the second biggest with capacity of 14 mil TEU. Normally the largest player commands the higher market multiple not the other way around.

There were news that MMC wanted to IPO its port assets at valuation of RM4bil at least. Current market cap which includes interest in Malakoff, Gas Malaysia and JV Gamuda- MMC amongst other is now only at RM2.8bil.

So yes, it is super undervalue.

Agree that this is an undervalue stock especially when compared to its comparable Westport (which is trading at 24x PE).

The stock also provide investor with exposure to post covid recovery play. I think this is a safer bet than buying directly into expensive vaccine players or riskier industry like aviation.

Also with Biden coming in as US president next month, most analyst are expecting global trade to improve further which bodes well for port operators like MMC.

In general when its right issue or private placement, both will dilute minority shareholders that did not participate. But in Malaysia, private placement are sometimes used to provide access to interested parties to acquire big blocks of shares at a discount. The question that we need to ask is why? Most of the time its mainly because they believe the outlook of the company will be better in the future (new projects, disposal assets at big gains, better earnings etc).

If it was really just to raised capital, most will prefer right issues or debt. This private placement is being subscribe by Karim himself. If u are worried, just sell first and maybe enter later. But based on previous private placement (SCIB and KPOWER included) by Dato Karim, i bet there will be some positive announcement down the road (new contract or better earnings etc). Time will tell.

Typical mbmr share to fall when we think all is fine. But still it is a very good stock to have in ur portfolio. Limited debt and steady generation of free cash flow. Pay good dividend as well. The only bad thing is the management which is mostly very passive. Even if the share price falls to rm1 for example, they will still do nothing. No buyback. Hope they can change management to someone that works to increase and protect shareholder value.

Currently the cheapest glove counter base on fwd earnings. Market are too pessimistic of glove companies outlook. But i wouldn't mind having some exposure in this just as a hedge against the bullishness of cyclical stocks at the moment. Today, people are bidding up even air asia x share price which is still not sure to even survive in the near term.

I think a lot of people are too pessimistic on the glove counter outlook once the vaccine is available for the general public. For sure the profit will not be as high at 2bil per quarter but even if it falls to less than half at around rm1bil per quarter or rm4bil per annum..at the current price, Top glove is only trading at 14x PE. Every quarter it will probably still generate strong cash flow. Being the largest manufacturer in the world, highly likely it would be able to defend its market position from smaller players especially those that just started.

At 1.30 i don't think felda will succeed in privatising fgv especially now with cpo at a high price. I think the purpose is just to block syed mokhtar from controlling fgv.

This is a very opportunistic privatization by Tan Sri Nik especially when they are in line of getting a lot of cash from litigation of which they have already won or awarded by the court.

johnbrook calculated that the award is at least RM70 mil (refer above). They actually already got the RM20mil from govt last month. RM70mil = 30 sens per share. This does not include the current businesses and the other assets of the company. As of September the NTA is 26 sens per share.

Offering less than the litigation award is really taking advantage of the minority shareholders. The award is as good as cash. Already they are taking the other assets for free.

Hope they can take this into account and offer a higher price to the minorities.

I think u need to be willing to hold this stock for another 12 months or so. The next couple of quarters will probably show earning growth but the share price might find it hard to move up fast as long as Awang keep on selling. But given the high daily trading volume i am sure he will be done selling in a couple of quarters.

Just some question: If Syed Mokhtar inject his asset and he will get FGV shares in return. If the amount exceeds the 33% he needs to the a General Offer right to the minorities?

I know the long term story of FGV after LLA is actually bright (Cash + Syed Mokhtar = profitable company), but just want to know if there is any short term play here for us. ;).... anyone in corporate finance can advice?

Max, always been trading at crazy high PE for years already. It is a good company with consistent revenue and earnings growth since 2003. It actually can churn out higher profit if its stops with the marketing and expansion plan (less expenses in marketing, depreciation charges, etc) but that not what its current investors wants.

Like all growth stocks.. you have to pay.

CIMB is just too cheap at this level. Currently trading at basically the same level as during the financial crisis in 2008 (need to adjust for bonus issue in 2010). I know the recent result was not great but when the economy rebound back next year, profit should be a lot better. I dont think any other major malaysia banks trades at 2008 level except CIMB.

FYI, from the lows recorded in 08 the share price actually almost tripple in 2 years time (mainly because profit also improve significantly). Maybe this is an opportunity for those with 3 years horizon.

Bro Glove, heres link for warrant: https://klse.i3investor.com/servlets/stk/stwarrant/7113.jsp

Anyway, with the reemergence of 2nd and 3rd wave, most gloves stocks will be back in investors radar. At least as a hedge for any prolong economic lockdowns.

This one is high risk high return play. I bet airlines stocks will go up even faster than pharma companies when the vaccine is ready. But capital call is almost certain. Analysts say around RM1 bil so those that want to bet on Air Asia need to prepare additional 30 sens on top of the 55 sens now. Still cheap though if you think air travel will normalize once vaccine is found.

I still think govt will still help AA via loans later. Just that now hot topics in market since govt also own MAS ( this one has no hope in my opinion).

Wow free money. hahah. 18% return is not bad. just leverage a lot if you think this would happen. In most cases, the offeror must have done their homework first. Just need to be patient. SCR normally takes around 1 year to complete (at most). Good luck guys.

I still think the deal is still on. Never heard a deal being rejected by the company that initiated the deal. UEM Sunrise is control by UEM Group. UEM Group is control by Khazanah. The directors are all appointed by Khazanah. If the deal does not happen it should by because Ecoworld rejected it not the other way around.

My guess is Ecoworld wants a higher price. Just wait and see.