MMC Corporation Bhd
(Oct 1, RM3.12)
Upgrade to outperform with higher target price of RM3.80 (from RM2): We are upgrading MMC to an “outperform” (from “neutral”) as the market, in our view, has under-appreciated two key developments on the stock: (i) south Johor land, and (ii) the Kuala Lumpur Mass Rail Transit (MRT) project. We view MMC as a laggard play on these developments.
As the second largest land owner in south Johor (Iskandar Malaysia), MMC is a beneficiary of improving Malaysia-Singapore relations. We are now more confident that the Temasek-Khazanah JV will launch the Iskandar wellness project within the next 12 months, which we believe will pave the way for more investment in Iskandar. In our view, this will increase demand for land within Iskandar, which could lead to an upward re-rating of land values in south Johor.
MMC and Gamuda are jointly bidding for the KL Mass Rail Transit (MRT) project. Despite the positive news flow on the project, MMC’s share price performance has underperformed Gamuda in the last month, leading us to view MMC as a laggard play on the MRT project.
We are upgrading MMC’s target price to RM3.80 (from RM2) on: (i) higher land values of RM32 per sq ft (against RM20 previously); and (ii) rolling year-end valuations to FY2011; and (iii) using a multiple of 7.5 times earnings to value the operations. With an implied 29% potential upside, we are upgrading MMC to an “outperform” (from “neutral”). — Credit Suisse, Sept 30
This article appeared in The Edge Financial Daily, October 4, 2010.
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