MIDF Research, AmInvestment Bank maintain 'buy' call for MMC Corp

KUALA LUMPUR, Aug 25 -- MIDF Research (MIDF) has maintained its 'buy' rating for MMC Corporation Bhd (MMC Corp), following the company’s resilient earnings which grew 21.2 per cent year-on-year for the first half of financial year (FY) 2020. 

In the second quarter of FY2020, MMC Corp's net profit increased 15 per cent to RM77.4 million from RM67.2 million a year ago. 

However, the research house has revised its target price (TP) for MMC Corp to RM1.15 per share from RM1.17 per share previously due slight adjustments to earnings estimates.

In a research note, it said since Maersk -- the world’s largest container ship operator -- owns a 30 per cent stake in the Port of Tanjung Pelepas (PTP), a unit of MMC Corp, the shipping company will ensure that PTP remains as its regional transshipment hub in the wake of the COVID-19 pandemic. 

Aside from the PTP, MMC Corp’s ports such as Johor Port and Penang Port have a high concentration of gateway cargo of more than 90.0 per cent of total container throughput, which is positive as global trade starts to pick up, MIDF said.

It added that the increasing prevalence of intra-ASEAN trade following the emergence of regional distribution hubs in ASEAN, especially in Malaysia, will bode well for the two ports. 

A further earnings catalyst for MMC Corp is the possible reinstatement of the Klang Valley Mass Rapid Transit 3 (KVMRT3) project at a revised cost -- estimated to be half of the original price tag of RM45 billion, said MIDF. 

It noted that key downside risks to the company’s earnings include a prolonged COVID-19 outbreak, weaker than expected container volumes at MMC Corp’s ports and downward revision of the earnings of its listed associates.

Meanwhile, AmInvestment Bank said the outlook for the port sector remains resilient, backed by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports. 

The significant relocations of manufacturing bases by multi-national companies out of China due to rising labour and land costs, exacerbated by the United States-China trade war, also places MMC Corp in a good position with its stable of five ports in Peninsular Malaysia, with a total container handling capacity of 21.3 million twenty-foot-equivalent units (TEUs) annually. 

In a note, AmInvestment also maintained a 'buy’ call for MMC Corp, raising its TP to a fair value of RM1.49 per share from RM1.13 per share previously. 

As at 11.39am, the company's share price was one sen better at 72 sen, with 3.04 million shares changing hands.

-- BERNAMA