Kenanga Research is neutral to slightly negative on the proposal by Malakoff Power Bhd, via Sterling Asia, to acquire Hicom Power Sdn Bhd for RM575 million.
HICOM Power, an operation and maintenance operator for Tanjung Bin's power plant, is a wholly-owned unit of DRB-HICOM Bhd.
Malakoff if a 51 per cent-owned sub subsidiary of MMC Bhd.
In a note today, Kenanga said it did not see any material impact (cost saving) from this acquisition to Tanjung Bin's operation and the financing of the acquisition will definitely increase MMC's net gearing.
"MMC will have to fork out about RM59 million for the equity portion, which will be easily funded by its current operating cash flow," it said.
Kenanga said the RM575 million price was based on HiCOM Power's discounted free cash flow for its recurring income in the next 20 years.
On outlook, Kenanga said it expected MMC to actively look for new assets as it has progressively reduced its stake in its subsidiaries like Gas Malaysia and Malakoff from their coming listings.
KTM Bhd could potentially be one of its new assets, it said.
Kenanga has maintained its target price for MMC at RM2.80.
It has, however, downgraded its recommendation from 'outperform' to 'market perform' due to limited upside to MMC's target price and the lack of immediate catalysts due to the election risk. -- BERNAMA