MIDF Research maintains “buy” on MMC Corp

PETALING JAYA: MIDF Research is maintaining its "buy" call on MMC Corp Bhd, with an unchanged target price of RM3.11.
"We believe MMC is a deep value play with assets ripe for monetisation," its analyst Tay Yow Ken said in a report last Friday.
Tay said the research house likes MMC as its three business pillars are solid with potential rerating catalysts, including potential listing of its ports assets, better performance by Malakoff Corp Bhd with new contribution from Tanjung Bin Energy plant and healthy order book for the construction segment of more than RM9 billion.
"While the (energy) segment could see maintenance costs remaining elevated in 2HFY16, we believe the coming quarters will see better contributions from 1,000MW (megawatt) Tanjung Bin Energy plant commissioned in March 2016 and better performance from Kapar Energy Ventures due to lower unscheduled outages," he added.
On the other hand, Tay said MMC's ports segment has overtaken its energy segment to contribute the largest share of both revenue and profit before tax (PBT) at 72% and 53% respectively, following the acquisition of NCB Holdings Bhd and deconsolidation of Malakoff.
He said PBT for the ports segment saw an increase of 41% year-on-year with the consolidation of NCB.
In addition, Tay said the group's engineering and construction segment has began to recognize higher billings from its Rapid Co-generation and Langat 2 projects as they kick into higher gear.
"We are not concerned by KVMRT1 reaching its tail end as order book is well replenished with mega projects secured, i.e. Langat 2, Rapid Cogen, KVMRT2 and Pan Borneo Sabah," he added.
Meanwhile, Tay said the group's six months period earnings ended June 30, 2016 was within the research firm's expectation, but below consensus, making up 51% of its full year forecast of RM319 million but only 41% of consensus estimate.
"We excluded gains from forex and disposal in deriving the core Patami (profit after taxation and minority interest)," he added.
MMC's six-month net profit slumped 87.8% from RM1.45 billion to RM176.36 million on the back of a 44.9% decline in revenue from RM3.42 billion to RM1.89 billion.