This article first appeared in The Edge Financial Daily, on November 26, 2015.

KUALA LUMPUR: MMC Corp Bhd, which reported a 54% drop in its net profit for the third quarter ended Sept 30, 2015 (3QFY15), said it will consider spinning off its port operations, following the approval of its shareholders to increase its stake in NCB Holdings Bhd, the sole owner of Northport (M) Bhd.

On the possible listing of its port operations, MMC Corp managing director Datuk Seri Che Khalib Mohamad Noh said: “That is an option we may consider later, not immediately.”

He was speaking to reporters on the sidelines of MMC’s extraordinary general meeting (EGM) yesterday. At the EGM, he said 99.99% of the group’s shareholders had supported its proposed acquisition of NCB.

“With the addition of NCB to our group, we now control the southern part (Northport in Klang, Port of Tanjung Pelepas [PTP] and Johor Port in Johor) and the northern part (Penang Port). We should be able to create a lot of synergy between all of our ports through cost optimisation and rationalisation of personnel,” he said.

He added that one of the challenges faced by Northport at the moment is the depth of the port’s draft, which is not able to cater for the latest shipping requirements.

“That is one of the top agendas that we are looking at to deepen the channel,” he said.

Asked if the acquisition of NCB will impact MMC’s gearing level, Che Khalib said NCB is already generating cash, which means that there is no gestation period for the asset.

“Based on our assessment, we should be able to cover the interest on the acquisition. We do have long-term plans for all our port groups,” he said.

To recap, MMC owns a 30.13% stake in NCB and would be acquiring another 53.42% stake from Permodalan Nasional Bhd and AmanahRaya Trustees Bhd, following its shareholders’ approval yesterday.

With the acquisition, MMC would be the largest shareholder of NCB, with a 83.55% stake. The acquisition would trigger a mandatory general offer for the remaining shares in NCB. 

It served an unconditional takeover notice on NCB’s board of directors after the EGM yesterday, with an offer price of RM4.40 per share, a 1.6% premium from NCB’s closing price of RM4.33 on the same day.

The offer is valid for acceptances until 5pm on the 21st day from the posting of the notice.

Meanwhile, MMC announced on Bursa Malaysia that its net profit for 3QFY15 came in at RM47.81 million, 54% lower than RM104.75 million a year earlier, as revenue shrank 61% to RM674.53 million from RM1.73 billion in the previous year.

However, for the nine months to Sept 30 (9MFY15), its net profit was up fivefold to RM1.49 billion from RM293.78 million in 9MFY14, even as revenue fell 37% to RM4.1 billion from RM6.46 billion.

In a statement, the group said the improvement in its cumulative net profit was mainly due to an exceptional gain of RM1.34 billion from the sale of Malakoff Corp Bhd’s shares when the latter was relisted on the local exchange on May 15.

As for the lower revenue for the cumulative period, it attributed it to the de-consolidation of Malakoff following its listing, absence of any substantial land sale in respect of Senai Airport City, and lower work progress from the Klang Valley Mass Rapid Transit Sungai Buloh–Kajang line.

Going forward, Che Khalib expects a better performance by MMC, driven by volume growth at PTP and Johor Port, additional contribution from NCB under its ports and logistics division, higher revenue from its energy and utilities division with the full recovery of Malakoff’s Tanjung Bin power plant, and higher gas volume sales at Gas Malaysia Bhd.

MMC’s shares closed up 5 sen or 2.44% at RM2.10, which valued the group at RM6.4 billion.