KUALA LUMPUR, June 4 ― Shares of MMC Corporation Bhd were higher following an announcement that Seaport Terminal (Johore) Sdn Bhd (STJ) had intended to take MMC private via selective capital reduction and repayment exercise.
MMC has received a letter from its controlling shareholder, STJ, a private vehicle of Tan Sri Syed Mokhtar Albukhary, held via Indra Cita Sdn Bhd, to undertake a selective capital reduction and repayment (SCR) exercise pursuant to Section 116 of the Companies Act 2016. Indra Cita owns 51.76 per cent of MMC.
MIDF Research, in a note today, said the proposal by STJ is appealing and a great value unlocking mechanism for a counter that is persistently trading at discounted valuation.
The research house upgraded its call on the company to “outperform” with a target price of RM2.
“A key risk to our call is a rejection of the proposed exercise by the shareholders, price revision on the offer and competing bid for the privatisation of MMC,” it said.
The research house added that this deal offers shareholders a chance to exit MMC, given the current challenging situation (Suez Canal incident’s ripple effect, lockdown in several countries, and uncertainty in its engineering segment).
As at May 28, 2021, MMC’s issued share capital stood at RM2.3 billion, comprising three billion shares.
Excluding STJ 51.76 per cent shares, the remaining shareholders shall receive a capital repayment of RM2.00 per share, amounting to a cash payout of RM2.9 billion, higher than the current RM2.3 billion issued share capital, and a bonus issue that will concurrently be undertaken to match the shortfall.
MIDF Research maintains a “buy” call on the company with a target price of RM2 per share, believing that MMC is a diamond in the rough.
“We maintain our view that MMC is deeply undervalued. We believe that MMC is a ‘no-brainer’ pick for the economic recovery play. We postulate that MMC is ripe for value revision as the group has proven to be resilient amid the pandemic.
“Even relative to its historical valuation, MMC is currently trading at 10.4 times price-to-earnings ratio (PER) which is a discount to its five years blended forward PER,” it said.
At 11am, shares of MMC jumped 39 sen to RM1.69 with 1.73 million shares transacted. ― Bernama