KUALA LUMPUR (March 2): AmInvestment Bank Research has maintained its "buy" call on MMC Corp Bhd at 83 sen as it sees value in MMC with its ports business valued at nine times forward price-earnings (P/E) on a stand-alone basis.

The research house in a note today maintained its forecasts for MMC but tweaked its fair value (FV) down slightly by 3% to RM1.49 (from RM1.54) based on sum-of-parts (SOP) valuation, adjusting for a 3% discount to reflect a two-star environmental, social, and governance (ESG) rating as appraised by it.

“The FV values MMC’s ports division at 16 times FY21 (financial year ending Dec 31, 2021) forecast earnings (a 30% discount to its peers' historical average to reflect its lower margins),” it said.

The research house came away from MMC’s analyst briefing feeling positive as the company highlighted that the sector’s outlook remains positive in FY21 as economies reopen.

Citing the management, the research house said the Port of Tanjung Pelepas (PTP) registered a record container volume handled of 9.85 million twenty-foot equivalent units (TEUs) in FY20, translating into an 8% growth year-on-year (y-o-y).

“It also expects a stronger container volume recovery at the Penang Port underpinned by the return of container volume from southern Thailand following the reopening of borders for cargoes, coupled with its recently awarded free commercial zone status (which enables it to tap into the transhipment market),” it said.

Similarly, Northport recorded the highest monthly volume of 310,500 TEUs handled in December 2020, backed by the return of major shipping lines such as ONE, Evergreen and MSC amid port congestion experienced at Westports and the Port of Singapore (PSA).

“This brought its total container volume handled to 2.7 million TEUs in FY20, translating into a 0.6% increase y-o-y. For the year, it received 108 ad hoc calls and observed nine diversions of services from Westports, as well as nine new services calling at the port,” it said.

AmInvestment Bank Research also said the ports sector in the region (Malaysia included) had come out from the Covid-19 pandemic relatively unscathed.

“Over the long term, its outlook is resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports.

“There have been significant relocations of the manufacturing base by multinational companies out of China due to rising labour and land costs exacerbated by the US-China trade war,” it said.

The research house noted that MMC is well positioned to capitalise on 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).

At 9.56am today, shares in MMC were five sen or 6.02% higher at 88 sen, valuing the company at RM2.38 billion.