MMC Corporation Bhd is expected to continue doing well in the second half of 2020, according to MIDF Research, backed by MMC’s ad hoc strategy in capitalising on the Port of Tanjung Pelepas (PTP).
“Management noted that the year-to-date container throughput at PTP is approximately 1% year-on-year higher at 4.64 million TEUs. This is a positive result given the expectation of earnings fallout from the pandemic.”
“Moving forward, the company is committed to maintain current market position and secure higher ad hoc calls from existing clients, on top of stringent cost optimizations initiatives. We believe this “ad hoc” strategy is a step in the right direction as PTP is one of the major consolidation points in Southeast Asia and more than 90% of its container throughput is coming from transshipment,” said MIDF.
The research house also noted that the ad hoc approach will bode well for MMC, due to the price competitiveness of PTP compared to the Port of Singapore, as well as PTP’s capability in handling large vessels.
“The continued prudence in taking advantage of the current business climate by looking for
ways to earn additional revenue is commendable, since liners are working towards strengthening their utilisation rates to more than 80% to sustain their own earnings.”
“This only serves to add into the attractiveness of PTP as a port of choice,” said MIDF.
At the same time, MMC is also proceeding to unlock the value of its land in Senai Airport City (SAC), an integrated industry park that is expected to service various industrial segments.
According to MMC management, there are 494ha of remaining landbank in SAC, with sales and purchase agreements signed with three parties covering 7.8ha of land, with another 37.4ha in the pipeline.
“Assuming a price of RM50 per sq ft, MMC will potentially unlock revenue of around RM243.5 mil from the sale of lands in SAC covering a total of 45.2ha of land.”
“Looking ahead, we do not discount the possibility of potential land sales taking place in the coming years due to the limited land availability in Singapore, prompting businesses to shift part of their distribution or manufacturing hubs to SAC,” said MIDF.
The research team also noted that MMC currently has an order book of RM4.87 bil, with the biggest portion coming from Mass Rapid Transit Line 2 (MRT2) projects, but cautioned that the visibility of the order book is limited til 2023.
“Management guided that replenishment is on its way as they are bidding for approximately RM5 bil worth of contracts, which includes projects related to water treatment plants, gas pipelines, aeronautical-related projects and a few others.”
“This RM5.0b estimate excludes the potential job win from MRT 3, a mega-infrastructure project that MMC is keen to be a part of,” said MIDF.
However, the research house maintains that it is urgent for MMC to continue its orderbook visibility past 2023.
MIDF maintains a buy call on MMC, along with a target price of RM1.15. The research house continues to view MMC favourably, with the opinion that seaports will be more resilient in the current operating environment when compared to air freight.
At the end of the trading day, MMC’s shares were last done at 73 sen, down a sen, with 5 million shares traded. – Aug 26, 2020
