MMC Corp’s container throughput may contract 10%

PETALING JAYA: The container throughput contraction for MMC Corp Bhd is expected to widen drastically in the second quarter as the coronavirus (Covid-19) continued to wreak havoc along the global supply chain and disrupt port operations.

Aminvestment Bank Research projected that MMC Corp’s overall container throughput would contract by 10% in FY20F compared with a marginal 1% growth it previously assumed.

The projection took cue from the much weakened purchasing managers’ index (PMI) outlook across the globe and the forecast by Copenhagen-based container shipping industry expert Sea-intelligence APS of a 10% contraction in global container shipping volume this year.

This is largely due to the slowdown in the Asia-europe and trans-pacific services.

“We believe a V-shaped recovery in the global economy is no longer the base-case scenario given the already highly visible trail of destruction left by the Covid-19 pandemic.

“Assuming that the Covid-19 pandemic could be significantly contained in the second quarter, we are hopeful to see some gradual recovery in container throughput from the second half of the year,” it said in a report.

Aminvestment Bank cut its FY20 to FY22F net profit forecasts for MMC Corp by 21%, 16% and 9% respectively and reduced its fair value by 25% to RM1.13, based on sum-of-parts valuation that valued its ports division at 16 times its revised FY21F earnings per share.

The research house, however, maintained a “buy” on the counter as it believed the recent selldown has been overdone.

“We see value in MMC Corp with its port business being valued at 11 times its forward price to earnings ratio on a stand-alone basis,” it said, adding that the outlook for the port sector in the region is resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports.

It said there have been significant relocations of manufacturing bases by multinational companies out of China to the region due to the rising labour and land costs, exacerbated by the trade war with the United States.

The research house added that MMC Corp is well positioned to capitalise on these via its stable of five ports in Peninsular Malaysia with a total container handling capacity of 21.3 million twenty-foot equivalent units (TEU) annually, which is 50% higher than its peer Westports Holdings Bhd of 14 million TEU.