MMC Corp Bhd may sell port stake to fund expansion
MMC Corp Bhd, an operator of ports and power plants, may sell part of Malaysia's second largest container port to fund expansion plans, according to a report in Malaysia's Business Times quoting sources.
The group, controlled by Syed Mokhtar Al-Bukhary, has received strong interest from local and foreign parties to buy a stake in the Port of Tanjung Pelepas (PTP).
'It is understood that one foreign party has even offered to take control of the port. That shows how much they value the business,' one of the sources told the business daily.
MMC needs to raise at least RM1.7 billion (S$708 million) to buy airport operator Senai Airport Terminal Services Sdn Bhd (SATS), that also owns a big piece of land in Johor.
MMC now holds 70 per cent of PTP, with the rest held by Danish shipping giant Maersk Line.
Another source said an independent valuer had priced the port at around RM9 billion. Assuming MMC sells a fifth of PTP at this value, it could raise about RM1.8 billion. It would also still have control of the port, the 17th busiest container port in the world.
Sources said several large shipping lines including Taiwan's Evergreen Marine Corp have made their interest known, while some local institutional investors are also in the running.
MMC's ports business, which includes Johor Port Bhd, is the group's second biggest profit contributor after its power plants.
In the year to Dec 31, 2007, the ports division posted an operating profit of some RM418 million, its annual report showed. It did not give a breakdown of how much PTP earned.
MMC officials declined comment when contacted.
Last week, MMC said that talks on the disposal were at an advanced stage.
MMC has now proposed to buy SATS from Syed Mokhtar at a lower price and will pay in cash instead of shares. It had wanted to buy SATS for RM1.95 billion in an all-share deal when the stock was trading around RM2.80 a share.
However, it now has more than halved, which means that if the deal were done at a lower share price, it would dilute MMC's shareholders (other than the main shareholders). MMC's earnings per share would also fall due to the bigger number of shares.
'The current share price is not reflective of MMC's inherent value, which now trades at a multiple of approximately only 0.7 times book value per share of RM1.94.
'The cash consideration will eliminate earnings dilution resulting from issuing a sizeable number of shares at the current depressed price,' MMC said in a statement last week.
The new price includes RM580 million for airport operations and RM1.1 billion for SATS' 1,099 hectares of freehold land slated for development as a logistics city.
However, the revised deal has been criticised by analysts who said the sale could be 'value destroying' as it reduces profit from its core business. They also pointed to governance risks as the deal is a related-party deal while SATS has yet to make money.
MMC shares lost 2 sen to close at RM1.13 yesterday.
The group, controlled by Syed Mokhtar Al-Bukhary, has received strong interest from local and foreign parties to buy a stake in the Port of Tanjung Pelepas (PTP).
'It is understood that one foreign party has even offered to take control of the port. That shows how much they value the business,' one of the sources told the business daily.
MMC needs to raise at least RM1.7 billion (S$708 million) to buy airport operator Senai Airport Terminal Services Sdn Bhd (SATS), that also owns a big piece of land in Johor.
MMC now holds 70 per cent of PTP, with the rest held by Danish shipping giant Maersk Line.
Another source said an independent valuer had priced the port at around RM9 billion. Assuming MMC sells a fifth of PTP at this value, it could raise about RM1.8 billion. It would also still have control of the port, the 17th busiest container port in the world.
Sources said several large shipping lines including Taiwan's Evergreen Marine Corp have made their interest known, while some local institutional investors are also in the running.
MMC's ports business, which includes Johor Port Bhd, is the group's second biggest profit contributor after its power plants.
In the year to Dec 31, 2007, the ports division posted an operating profit of some RM418 million, its annual report showed. It did not give a breakdown of how much PTP earned.
MMC officials declined comment when contacted.
Last week, MMC said that talks on the disposal were at an advanced stage.
MMC has now proposed to buy SATS from Syed Mokhtar at a lower price and will pay in cash instead of shares. It had wanted to buy SATS for RM1.95 billion in an all-share deal when the stock was trading around RM2.80 a share.
However, it now has more than halved, which means that if the deal were done at a lower share price, it would dilute MMC's shareholders (other than the main shareholders). MMC's earnings per share would also fall due to the bigger number of shares.
'The current share price is not reflective of MMC's inherent value, which now trades at a multiple of approximately only 0.7 times book value per share of RM1.94.
'The cash consideration will eliminate earnings dilution resulting from issuing a sizeable number of shares at the current depressed price,' MMC said in a statement last week.
The new price includes RM580 million for airport operations and RM1.1 billion for SATS' 1,099 hectares of freehold land slated for development as a logistics city.
However, the revised deal has been criticised by analysts who said the sale could be 'value destroying' as it reduces profit from its core business. They also pointed to governance risks as the deal is a related-party deal while SATS has yet to make money.
MMC shares lost 2 sen to close at RM1.13 yesterday.