Hwang DBS Vickers Research maintains BUY on MMC

Hwang DBS Vickers Research maintained its BUY call on MMC Corp Bhd with a target price of RM3.60, as the conglomerate is seen as one of the beneficiary Iskandar growth story as well as tipped to win a substantial contract soon.

The research house said that the rerating of other Iskandar proxies such as UEM Land Bhd, Tebrau Teguh Bhd, Sunway Bhd and even Crescendo Bhd should lift MMC's share price, with 68 per cent of its sum-of-part from Iskandar.

"We estimated that every RM5psf increase in land prices from our RM21-23 psf base case would raise SOP value by 8 per cent," said the research house in its report this morning.

It also added that the Johor Port may be next to be listed. The listing of Johor Port, if materialised, could raise concerns among investors as MMC could be less appealing as a holding company.

"But it has taken steps to address this, such as focusing on building a stronger construction/infrastructure franchise. In the near term, MMC is expected to clinch substantial infrastructure jobs without a JV partner, which should instill confidence in its construction franchise.

"The privatisation of its water concession arm, Aliran Ihsan, which has exciting growth plans, is another mitigating factor. There is also vast potential for Senai Airport with more tourist arrivals at Iskandar, although performance has been lackluster thus far," said Hwang DBS Vickers Research.