We believe MMC’s profits were within expectations although a
restatement of historical records due to the adoption of Int IC4 makes a proper
comparison difficult. Nonetheless,
the reported numbers show that
there were no major provisions from
associates during the quarter, thus
boosting profits from all 3 major business segments. We maintain our
forecasts pending greater clarity from the company’s analyst briefing today. The stock’s
catalysts are the upcoming listing of Gas Malaysia, rumours that MMC may
buy Tan Sri Ananda Krishnan’s power plants and the award of the MRT tunneling
project. Still a good Trade.
Within expectations,
probably. Proper comparison MMC’s full year results versus our expectations
and consensus has been made difficult as the company has had to restate its
previous earnings due to the adoption of Issues Committee Interpretations 4 (IC
Int.4) to determine whether an arrangement contains a lease. As
such, we estimate that MMC’s PBT is within our forecast although its net profit
was above our forecast by 11% and in line with consensus. We do not have the
restated 9MFY11 or 9MFY10 numbers for a proper comparison. The higher than expected
net 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 3
segments higher. Energy and Utilities earnings rose as there
was no provision for Kapar while Tanjung Bin saw more dispatch given the
shortage of gas in the country. Transport and Logistics were better
as PTP’s volumes rose 16% while Engineering earnings jumped as there was
no major provision for Zelan. Only the higher than expected finance charges
moderated these improvements. Excitement should be in Energy, Engineering. For
the Energy side, MMC will book in some RM307m worth of proceeds from the
listing of Gas Malaysia (not factored into our forecasts) as well as begin
construction of its RM6.7bn 1000MW Tanjung Bin power plant extension. Also the
1st Generation Power Purchase Agreements (PPA) are being renegotiated
and 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 selling
out. On the Engineering side, 2012 should see the booking of the Klang Valley
MRT project development partner profits.
Maintain Forecasts,
Still Trading BUY. Given the
uncertainty over the adjusted figures, we largely maintain our
forecasts for now. The excitement for MMC is not so much in its profits (PER of
23x 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
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