MMC CORP Bhd may list its power unit Malakoff Corp Bhd under a US$1 billion (RM3.2 billion) initial public offering (IPO) by the second quarter of 2015, now that the latter’s finances have bounced back.
Another key factor that may prompt MMC to push for an early IPO is Malakoff’s RM1.8 billion sukuk, analysts said.
The IPO, which will be among the largest in Malaysia, has been postponed twice.
Malakoff needs to redeem the sukuk, which carries a 6.3 per cent interest rate, before its maturity date in September 2015, failing which it will incur higher interest costs.
On that basis, the listing should ideally take place before September next year, analysts said.
MMC’s earnings recovered in the second quarter, driven by Malakoff’s Tanjung Bin power plant recovery and the Klang Valley mass rapid transit construction progress.
The company’s net profit for the period rose more than threefold to RM165.45 million from RM43.86 million a year ago.
“With Malakoff’s earnings recovery, we believe the probability of a listing has increased,” analysts at Kenanga Research said.
Tanjung Bin Power Sdn Bhd, the concessionaire of the 2,100-megawatt (MW) coal-fired power plant in Johor, is the main cash flow contributor to Malakoff.
The Tanjung Bin power plant represents a sizeable 18 per cent of MMC group’s current effective generation capacity of 5,500MW and 20 per cent of its 5,020MW power capacity in Malaysia, and hence is viewed as a key growth catalyst for Malakoff’s impending IPO.
Analysts had underestimated Malakoff’s earnings following previous major maintenance and forced outages at the Tanjung Bin power plant.
The company’s operations are now back to normal as the Tanjung Bin power plant’s key issues had been addressed.
This is also reflected in the pre-tax profit increase in MMC group’s engineering and construction division of 216 per cent quarter-on-quarter with Malakoff contributing more than 90 per cent to the profit.
Analysts also said as the Tanjung Bin plant has recovered and achieved almost 90 per cent availability factor in the second quarter, MMC is now receiving full capacity payment for the plant.
Meanwhile, another research firm estimated that Malakoff contributes 24 per cent, or RM2.9 billion, to MMC’s real net asset value (RNAV).
A listing of Malakoff could unlock an additional RM2 billion, or 65 sen a share, in RNAV for MMC, it added.
MMC shares eased 14 sen to close at RM2.52 yesterday.