MARC has affirmed its AA-IS rating on MMC Corporation Berhad’s (MMC) RM2.5 billion Sukuk Murabahah Programme with a stable outlook.
MMC’s significant competitive strengths in the engineering, ports and logistics segments that have translated to strong earnings generation remain key rating drivers. This is supported by steady earnings from its energy and utilities segment. These strengths have enabled the group to weather the current uncertain economic environment which was impacted by the COVID-19 pandemic.
MMC’s port segment has been largely cushioned by the pandemic crisis as reflected by a marginal growth of 0.9% y-o-y in 9M2020 for the group’s combined container handling volume. This was largely due to strong handling volumes recorded in 1Q2020 which moderated the impact in 2Q2020, followed by a subsequent recovery in 3Q2020. In light of the prevailing challenging economic and industry outlook, the group has also been selectively prioritizing the near-term capex of its ports.
Construction projects under the group’s engineering segment experienced a slow down during the movement control order (MCO) period, resulting in lower progress billings and revenue. However, earnings from this division were supported by improved margins due to MMC’s ability to manage its construction costs particularly for the Klang Valley Mass Rapid Transit Line 2 project and Langat Sewerage project. As at end-June 2020, MMC’s construction order book of RM4.9 billion provides earnings visibility through 2022.
Its utilities operations, undertaken by associate companies Malakoff Corporation Berhad (Malakoff) and Gas Malaysia Berhad, have remained stable. Regulatory changes in the natural gas distribution mechanism and the domestic power sector are not expected to have significant impact on the group’s utility businesses given its entrenched position in the sector. Both entities have collectively upstreamed annual dividends of between RM90 million and RM166 million over the past four years.
For 9M2020, group pre-tax profit increased by 7.6% y-o-y to RM366.7 million on revenue of RM3.2 billion, largely due to higher volume handled at its ports and improved contributions from its associate companies. Consolidated cash flow from operations remained strong at RM1.44 billion, largely driven by ports operations. Group leverage, which remains a moderating rating factor, declined slightly to 0.98x (2019: 1.03x) on lower borrowings of about RM10.0 billion, although the strong cash balance of RM2.8 billion translated into an improved net DE of 0.70x (2019: 0.79x).
The stable outlook reflects MARC’s expectation that the group’s ports and key business segments will exhibit comparable y-o-y performance, which would enable MMC to continue generating fairly steady earnings. The group is expected to maintain its key financial metrics which are in line with the current rating band.
Contacts:
Taufiq Kamal, taufiq@marc.com.my;
Lim Wooi Loon, wooiloon@marc.com.my.
© Press Release 2020
Disclaimer: The contents of this press release was provided from an external third party provider. This website is not responsible for, and does not control, such external content. This content is provided on an “as is” and “as available” basis and has not been edited in any way. Neither this website nor our affiliates guarantee the accuracy of or endorse the views or opinions expressed in this press release.
The press release is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Neither this website nor our affiliates shall be liable for any errors or inaccuracies in the content, or for any actions taken by you in reliance thereon. You expressly agree that your use of the information within this article is at your sole risk.
To the fullest extent permitted by applicable law, this website, its parent company, its subsidiaries, its affiliates and the respective shareholders, directors, officers, employees, agents, advertisers, content providers and licensors will not be liable (jointly or severally) to you for any direct, indirect, consequential, special, incidental, punitive or exemplary damages, including without limitation, lost profits, lost savings and lost revenues, whether in negligence, tort, contract or any other theory of liability, even if the parties have been advised of the possibility or could have foreseen any such damages.
