Buy at RM2.81 with revised target price of RM3.70 (from RM4.05): MMC reported 1QFY11 headline net profit of RM43 million (-56% quarter-on-quarter; +25% year-on-year) which was below our and consensus estimates. Earnings were dragged down by larger losses at Zelan Bhd of RM53 million against RM30 million loss in 1QFY10.
Operationally, the key divisions did well, as reflected in the 7% y-o-y earnings before interest tax (Ebit) growth to RM627 million. 1QFY11 transport and logistics Ebit jumped 27% y-o-y driven by its port business.
Pelabuhan Tanjung Pelapas Bhd's (PTP) throughput rose 18% to 1.8 million TEU, while Johor Port's conventional cargo volume and container volume rose 15% and 3% y-o-y. For its energy and utilities division, the overall higher dispatch factor for Malakoff Corp Bhd of 51% in 1QFY11 (against 49% in 1QFY10) and 6% y-o-y higher volume for Gas Malaysia Sdn Bhd drove 1QFY11 Ebit up 22% y-o-y.
We reduce our FY11 to FY13F profit by between 11% and 17% to prudently reflect continued losses at Zelan, where we factor in liquidated ascertained damages or provisions for its projects in Indonesia and Abu Dhabi.
We also take into account the recent unfavourable price structure for Gas Malaysia, whose spreads will narrow to RM2.04 to RM2.08 per mmbtu against RM3.95 previously. However, the impact will be offset by higher volume growth and strong TEU growth for PTP.
We recommend a 'buy' with a lower target price of RM3.70. We drop our target price after factoring in lower discounted cash flow value for Gas Malaysia.
While the news on Gas Malaysia might throw off valuations for a potential listing, there are other catalysts to look forward to. These are: (i) the expansion of 2,100MW Tanjung Bin coal-fired plant by 1000MW, with MMC being one of two parties short-listed. A decision will be made in 3QCY11; (ii) the RM50 billion mass rapid transit project, we use conservative assumptions in our sum-of-parts valuation; and (iii) higher values for its land in Johor. '
No comments:
Post a Comment