MMCCORP (FV RM3.70 - TRADING BUY) FY11 Results Review: Full Comparison Unavailable

Stock Name: MMCCORP
Company Name: MMC CORPORATION BHD

Research House: OSK

Price Call: TRADING BUY

Target Price: 3.70

We believe MMC's profits were within expectations although arestatement of historical records due to the adoption of Int IC4 makes a propercomparison difficult. Nonetheless, the  reported numbers show thatthere  were no major provisions fromassociates during the quarter, thus boosting profits from all 3 major business segments. We maintain ourforecasts pending greater clarity from the company's  analyst briefing today.  The stock's catalysts are the upcoming listing of Gas Malaysia, rumours that MMC maybuy Tan Sri Ananda Krishnan's power plants and the award of the MRT tunnelingproject. Still a good Trade.

Within expectations,probably. Proper comparison MMC's full year results versus our expectationsand consensus has been made difficult as the company has had to restate itsprevious earnings due to the adoption of Issues Committee Interpretations 4 (ICInt.4) to  determine  whether an arrangement contains a lease. Assuch, we estimate that MMC's PBT is within our forecast although its net profitwas above our forecast by 11% and in line with consensus. We do not have therestated 9MFY11 or 9MFY10 numbers for a proper comparison. The higher than expectednet profit was due to a lower than expected tax rate as the  adoption of IC Int.4 probably led to a  positive tax charge for FY11,just as it did in the company's restated FY10.

EBIT at all 3segments  higher.  Energy and Utilities earnings rose as therewas no provision for Kapar while Tanjung Bin saw more dispatch given theshortage of gas in the country. Transport and Logistics  were better as PTP's volumes rose 16% while Engineering earnings jumped as there wasno major provision for Zelan. Only the higher than expected finance chargesmoderated these improvements. Excitement should be in Energy, Engineering. Forthe Energy side, MMC will book in some RM307m worth of proceeds from thelisting of Gas Malaysia (not factored into our forecasts) as well as beginconstruction of its RM6.7bn 1000MW Tanjung Bin power plant extension. Also the1^st Generation Power Purchase Agreements (PPA) are being renegotiatedand this will involve Segari. Finally, MMC could be in the running to acquire Tanjong's  extensive power plants  in Asia and Africa as Tan Sri Ananda Krishnan is rumoured to be sellingout. On the Engineering side, 2012 should see the booking of the Klang ValleyMRT project development partner profits. 

Maintain Forecasts,Still Trading BUY.  Given  the uncertainty  over  the adjusted figures, we largely maintain ourforecasts for now. The excitement for MMC is not so much in its profits (PER of23x for 2012) but rather the strong news flow surrounding the company. As such,we maintain our Trading Buy call pending today's analyst briefing.  Our SOP FV is unchanged at RM3.70.

Source: OSK188