MMC well positioned to capitalise on manufacturing base relocations
KUALA LUMPUR: The outlook for the port sector in Malaysia is resilient, analysts project, with groups such as MMC Corporation Bhd (MMC) set to capitalise on significant relocations of the manufacturing base by multinational companies out of China.
According to AmInvestment Bank Bhd (AmInvestment Bank), the outlook for the port sector in the region (Malaysia included) is resilient, underpinned by global trade and investments in the manufacturing sector that generate tremendous inbound (feedstock) and outbound (finished product) throughput for ports.
“There have been significant relocations of the manufacturing base by multinational companies out of China due to the rising labour and land costs, exacerbated by the US-China trade war,” AmInvestment Bank said.
“MMC 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 (TEUs) annually.”
The research firm noted that this was 50 per cent higher than peer Westports’ capacity of 14 million TEUs annually.
“While we are mindful of the soft patch ahead amidst a major slump in the world economy in the aftermath of the Covid19 pandemic, we believe the selldown on MMC has been overdone.
“We see value in MMC with its port business valued at 12.5-fold forward price-toearnings (P/E) on a stand-alone basis.”
Meanwhile, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) opined that although 2QFY20 will be a sluggish quarter amidst impact of lower consumption due to the Covid-19 pandemic, Port of Tanjung Pelepas’ (PTP) role as a transshipment hub will act as a cushion for other MMC’s ports which rely heavily on gateway containers.
“Therefore, this will prevent MMC’s overall container throughput from declining by more than 10 per cent annually,” MIDF Research said.
In addition, the research arm expected MMC’s container throughput to recover in financial year 2021 (FY21), in line with the International Monetary Fund’s (IMF) projection of Malaysia’s gross domestic product (GDP) growth of nine per cent for the same year, the fastest amongst Asean-5.
“Other catalysts for MMC include the possible reinstatement of the KVMRT3 project at a revised cost, possibly half the original price tag of RM45 billion.”