Bright prospects for MMC’s port business

Revenue rises 5.23% YoY to RM1.1b due to higher volumes handled by its port operators, PTP and Northport


MMC Corp Bhd’s ports are expected to handle more than 10 million twenty-foot equivalent units (TEUs) in financial year 2021 (FY21) as the brisk activities at the Port of Tanjung Pelepas (PTP) are underpinned by a still growing container throughput volume.

PTP’s container throughput volume surged by 16% year-on-year (YoY) to 2.78 million TEUs in the first quarter of 2021 (1Q21) versus 2.4 million TEUs a year ago.

AmInvestment Bank Bhd predicted MMC-owned Northport (M) Bhd to observe a bumper year in FY21 forecast (FY21F) which would be fuelled by increased volumes from existing clients and from the diversion of cargoes from its competitor, Westports Holdings Bhd.

“With doors now being opened, Northport hopes to retain some of these new customers in the future,” the investment bank stated in a report last Friday.

In the next two years, MMC’s engineering business hopes to achieve an orderbook above RM1 billion and the company has positioned itself to bid for various public projects proposed under Budget 2022.

It is planning to accept work packages from within its group such as Tanjung Bin Industrial Park, Northern Technocity Sdn Bhd and water or wastewater-related projects under wholly owned Aliran Ihsan Resources Bhd.

MMC is also eyeing an interest for its Senai Airport City Sdn Bhd (SAC) land to develop regional distribution hubs, with the diversified group indicating a few potential land sale deals which involve 162 acres (65.6ha) there, AmInvest stated after having a briefing with MMC’s management.

The deals consist of nine different investors and could reach sales of RM340 million at a price of RM50 per sq ft.

“SAC sits on a 2,718-acre land of which 400 acres — being free industrial and commercial land with common infrastructure and utilities — are sellable. SAC hopes to attract industries that could generate inbound (feedstock) and outbound (finished product) throughput for Senai Airport and PTP within the vicinity,” the report noted

AmInvest has the view that the port sector in the region would exit the Covid-19 pandemic untouched and its long-term outlook to remain resilient supported by global trade and investments in the manufacturing sector.

The significant relocations of the manufacturing base by multinational companies out of China — due to the rising labour and land costs, exacerbated by the US-China trade war — have helped support the positive outlook for the ports business.

“MMC is well-positioned to capitalise these via its stable of five ports in Peninsular Malaysia with a total container handling capacity of 21.3 million TEUs annually (50% higher than its peer Westports’ capacity of 14 million TEUs annually),” the bank noted.

MMC’s port business is valued at 12 times forward price-earnings on a standalone basis by the investment bank which has maintained a ‘Buy’ call on the company, with a fair value (FV) of RM1.68 based on sum-of-parts valuation method, adjusted for a 3% discount to reflect a two-star environmental, social and governance rating.

The FV values MMC’s ports division at 16 times FY22F earnings (a 30% discount to its peers’ historical average to reflect its lower margins).

MMC’s net profit increased 115.45% YoY to RM124.7 million in 1Q21 from RM57.88 million in 1Q20, supported by improved performance at its logistics business and lower finance costs.

Revenue for the period rose 5.23% YoY to RM1.14 billion due to higher volumes handled by its port operators, Pelabuhan Tanjung Pelepas Sdn Bhd and Northport.

The result was offset by lower work progress on the Klang Valley Mass Rapid Transit Sungai Buloh-Serdang-Putrajaya Line, lower passenger and cargo volumes at Senai Airport and lower volume handled at Penang Port Sdn Bhd, it noted in an exchange filing to Bursa Malaysia last week.

The company’s ports and logistics segment revealed a 12.9% YoY increase in revenue to RM903.6 million, while its revenue in its engineering segment revenue decreased by 13.3% YoY to RM229.2 million.

MMC’s share price closed at RM1.17 last Friday.