KUALA LUMPUR (Sept 24): MMC Corp Bhd shares rose 2.8% at mid-morning today after AmInvestment Bank Bhd Research initiated coverage on the stock.

At 10.31am, MMC Corp rose 3 sen to RM1.10 for a market capitalisation of RM3.35 billion.

AmInvestment initiated coverage on MMC at RM1.07 with a Buy recommendation and fair value of RM1.66 based on sum-of-parts valuations.

In a note today, the research house said it believes MMC has been shedding excess "weight" in recent years, transforming itself from a conglomerate, where growth is typically capped by business operations that are too diverse, to predominantly a ports and logistics player, with the ports and logistics division contributing to 60% and 39% of group turnover and net profit respectively in FY18.

It said the "trimming" came largely from the listing of Gas Malaysia Bhd in 2012, reducing MMC's effective stake in the sole licensed seller of natural gas in Peninsular Malaysia to 30.9% from 41.8%, and Malakoff Corp Bhd in 2015, paring down its stake in the second largest power producer in Malaysia to 37.7% from 51%.

"We expect MMC's earnings to grow by 75% and 6% in FY19-20F driven largely by: (1) the recent tariff hike in most of the ports MMC owns; (2) better margin from its ports division as a result of effective cost savings measurement; and (3) full consolidation of Penang Ports' account.

"For FY20F, we project its ports and logistics division to contribute to 56% of group earnings, followed by construction (21%) and engineering (23%)," it said.