KUALA LUMPUR: MMC Corp Bhd has sold three parcels of land totalling 188.7 acres (76.4ha) in Senai Airport City, Johor, to I-Park Sdn Bhd, a member of the US-based AME Group, for RM369.97 million cash, a price that is more than double its original purchase price of RM140.5 million.

The disposal is undertaken by Senai Airport City Sdn Bhd (SACSB), a wholly-owned unit of Senai Airport Terminal Services Sdn Bhd, which in turn is wholly owned by MMC. SACSB is a property company.

In an announcement to Bursa Malaysia yesterday, MMC said the land was purchased at RM140.5 million in 2009. The total book value of the tract amounted to RM170.17 million in MMC’s financial accounts as at Dec 31, 2014.

The group said the land disposal would result in an estimated gain of RM153.5 million, or five sen per share. This would be a big boost to MMC’s earnings.

For the first quarter ended March 31, MMC posted a net profit of RM95.75 million, compared with RM23.57 million for the previous corresponding quarter. Revenue was higher at RM1.98 billion versus RM1.86 billion a year ago.

MMC, a flagship company of tycoon Tan Sri Syed Mokhtar al-Bulkhary (pic), floated its power generation unit Malakoff Bhd in mid-May.

“The Malakoff listing had a major impact on MMC’s balance sheet, removing RM18.2 billion worth of debt because its 51% equity stake has been reduced to 38%, and it no longer needs to consolidate the debts,” said AllianceDBS Research.

“We project gross gearing will drop to just 0.65 times from 2.3 times currently. ROE (return on equity) should also improve to 6.1% to 7.5% from 5.8% to 6.8%,” it added.

AllianceDBS has a “buy” call on the stock as it sees it as steeply undervalued.

“Based on the market value of both Gas Malaysia [Bhd] and Malakoff, the market is assigning only RM2.3 billion to the unlisted businesses, such as ports, construction, [the] sole airport in Johor, water concessions and 4,556 acres of land in Johor,” said the research outfit.

“We understand its port business will be the next to be listed,” it added.

AllianceDBS noted that MMC recently raised its stake in NCB Holdings Bhd to 30.13% and this could be a prelude to an eventual listing of its port business.

“But it will likely be via an IPO (initial public offering) as opposed to injecting its existing ports into NCB,” it added.

MMC (fundamental: 0.4; valuation: 2) shares closed down 3.63% at RM1.86 yesterday, with a market capitalisation of RM5.88 billion.

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This article first appeared in digitaledge Daily, on August 12, 2015.