MMC to use proceeds from IPO to reduce debts

KUALA LUMPUR: MMC Corp Bhd intends to use the capital raised from the impending listing of Gas Malaysia Bhd as well as possible listings of other subsidiaries to halve its debt and pay higher dividends.

“The strategy now is for us to pare down the debt. Our interest cost is RM180mil per annum. Our immediate plan is a reduction of half of that which will save the company RM90mil per year,” group managing director Datuk Hasni Harun told reporters after the company's AGM.

As at Dec 31, 2011, MMC had borrowings of RM3.6bil, or a gearing level of two times, analysts said.

When contacted, M&A Securities head of research Ahmad Morat told StarBiz that less debt would enable MMC to increase its dividends from a gross yield of 1.5% based on the current share price, which was one reason for the lack of interest in its stock.


Managing Director Datuk Hj Hasni Harun (right) replying to questions from the media after the MMC Corporation Berhad's 36th AGM today. - Starpic by LOW LAY PHON
On MMC's proposed relisting of Malakoff Corp Bhd, Hasni said that under Bursa Malaysia's regulations, it would have to divest at least a quarter of its 51% stake in the former along with the other shareholders.

He added that new shares in Malakoff might be issued. “The board is discussing what we are comfortable with in terms of the shareholding. The key for us is to have a controlling stake.

“We are starting the process, which means we are appointing equity advisers and underwriters to advise the board. In terms of valuation, we privatised it (Malakoff) for about RM9bil, that was the value then.

“(In view of) the new businesses we have added as well as forays abroad, we believe the valuation should be higher, but we can't give a figure right now.

“Obviously for us, the expectation is that the value should be higher than when it was privatised,” he said, adding that the process to take the company public would begin after June and could take six to 12 months to complete.

Malakoff, the country's largest independent power producer with a total generating capacity of 5,020 MW, accounts for 23% of Peninsular Malaysia's total installed capacity of 21,817 MW.

Its other owners are the Employees Provident Fund with a 30% interest, Kumpulan Wang Persaraan with 10% and private equity funds with 9%, Hasni said.

The Tan Sri Syed Mokhtar Al-Bukhary-controlled MMC had privatised Malakoff in 2006 for RM9.3bil, or RM10.35 per share, but it said at its AGM last year that three subsidiaries would be spun off Malakoff, Gas Malaysia and Johor Port Bhd with an estimated combined market capitalisation of up to RM14bil.

M&A Securities' Ahmad opined that Malakoff could potentially be a much sought-after dividend stock due to its stable income.

In its financial year 2011, the utility made RM5.7bil in revenue and RM634mil in pre-tax profit.

Hasni also said the other companies in MMC's stable that had growth potential would be considered for an initial public offering (IPO).

“We have scanned through all our companies. What is key is their maturity,” he explained.

When pressed for more details, he pointed out that since MMC's engineering and construction segment, under which its joint venture (JV) with Gamuda Bhd is parked, was mostly run on a JV basis, that leaves its transport and logistics arm as the only likely IPO candidate.

“We could either consolidate or list it as a single entity,” he said.