*MMC Corp at RM1.05*

*A Proxy of Port Recoveries*

- MMC is one of the *10 largest port operators in the world*, owning PTP, Johor Port, North Port, Penang Port and Tanjung Bruas Port in Malaysia;; Redsea Gateway Port in Saudi Arabia. MMC is also the operator of Senai Airport.

- MMC also *involves in utility segment through 37% stake in Malakof and 31% stake in Gas Malaysia.* For its engineering segment, it has RM2.95b of orderbook which ensure the ordebook visibility till FY23.

- To note, Malaysia’s 2020 exports is having a resilient growth due to the US-China trade diversion, with an 11% yoy growth despite Covid-19. Export value also rose to RM95.7b, the highest level since October 2018. As a result, MMC benefitted from the higher container volume in its ports, handling 2.739m TEUs and port revenue. 4Q20 PBT grew 10% yoy and 87% yoy respectively.

- The positive outlook on global trade and investments have been sustained till 2021, with recently released Malaysia’s Feb 2021 export showing a *17.6% yoy growth.* Moving forward, the economy recovery and strong demand for global shipping as well as container shortage will be the key rerating catalyst to fuel MMC’s earnings by generating more feedstock and finished products throughput for its ports.

- *In terms of valuations, MMC is now trading at only 8.5x PE,* a steep discount to its 5-years average PE of 13x. This is also a cheap valuation for its current book value of RM3.38/share. Based on 13x PE and assume every quarter in FY21 to deliver only half of 4Q20’s 5.9c EPS, indicative fair value would be RM1.53.

- There are also *talks for IPO of its port assets,* valued at RM4b. If we look at MMC’s current market cap of about RM3.2b now, its stake in Malakof and GasMalaysia is already about RM2.7b, if the ports go through IPO with RM4b valuations, total will be about RM6.7b, and indicative fair value would be RM2.20/share.

Disclaimer: This is not a buy/sell call, just personal research. Trade at your own risk.