MMC to continue other buys after Sabah Ports bid falls through

The firm could now move to acquire the remaining 51% stake in Penang Port, says analyst


MMC Corp Bhd’s unsuccessful bid to buy a stake in Sabah Ports Sdn Bhd will allow the port giant to focus on concluding its other ongoing plans to buy other assets.

According to a report by MIDF Research, prepared by port analyst Adam Mohamed Rahim, MMC could now move to complete the acquisition of the remaining 51% stake in Penang Port Sdn Bhd.

“We maintain our earnings forecast as we previously did not impute earnings from the proposed acquisition of Sabah Ports into our estimates,” he said in the report.

An analyst contacted by The Malaysian Reserve (TMR) said the proposed acquisition of Sabah Ports by MMC could also be viewed as “a lack of urgency” for the latter to expand its footprint in the East Malaysia region.

“As reported by a local daily, the proposed stake was 20%, which did not carry a prominent effect to the company as it would not have much control in Sabah Ports, apart from what were stated in the proposed agreement,” the analyst said.

Sabah Ports is a wholly owned subsidiary of Suria Capital Holdings Bhd, which is 51% owned by the Sabah state government via the privatisation exercise from Sabah Ports Authority on Sept 1, 2004.

The analyst added that MMC could have an extended focus to acquire the remaining stake in Penang Port.

“Their plan to complete the acquisition of Penang Port has been delayed for three months. Now, they will have a greater focus to ensure its success of the port acquisition, in which the terms to satisfy the acquisition have been extended from April 10, 2018,” he said.

On April 11, MMC announced that the company and the vendor of Penang Port had mutually agreed to further extend the period to satisfy or waive the conditions precedent in the agreement up to July 9, 2018.

The analyst added that MMC’s target to list its port assets by early 2019 would have a better potential to be materialised.

“MMC has a lot on their plate right now. They can focus on listing its port assets once Penang Port is wholly acquired as this could be a rerating catalyst for the stock and increase the competitiveness of its existing ports,” he said.

MMC group MD Datuk Seri Che Khalib Mohamad Noh (picture)  said the group plans to list its port assets — the largest revenue contributor for the group — by the end of 2018 or early 2019.

The group’s intention to pursue the Sabah Ports acquisition was initially seen as the firm’s keenness to expand its footprint in the Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area, while complementing China’s One Belt, One Road (OBOR) initiative.

“We view it as a positive as it would solidify the firm’s position in increasing the connectivity and cargo activity between the peninsula and East Malaysia.

“As we know, China’s OBOR initiative includes the East Coast Rail Link’s second phase that connects Kuantan Port to Port Klang.

MMC confirmed in a statement said it received an official affirmation from the Sabah State Economic Planning Unit to confirm its non-acceptance of the proposal.

MMC is the country’s largest owner of port assets in the country with stakes in Northport (M) Bhd, Pelabuhan Tanjung Pelepas Sdn Bhd, Johor Port Bhd, Penang Port and Tanjung Bruas Port Sdn Bhd.

Collectively, MMC handled 15.6 million 20ft equivalent units as registered in 2016.