MMC under heavy selling

MMC has announced two acquisitions today. It proposed to acquire the Senai Airport Terminal Services Sdn Bhd ('Senai Airport') at RM1.95 billion (to be paid via the issuance of 696.4 billion shares in MMC at RM2.80 per share) and to buy up the remaining shares in Johor based-water treatment player, Aliran Ihsan Resources Bhd (AIRB), which he does not own, for a cash sum of RM240 million (or, 90 sen per share).

Investors are not happy with these two proposals because both Senai Airport and AIRB are controlled by the major shareholder of MMC, Syed Mokhtar. The Senai Airport acquisition is more controversial, as Syed Mokhtar had taken over the Sultan Ismail Airport- the main asset under Senai Airport- in October 2003 for RM80 million cash from Malaysia Airports Holdings Bhd. This acquisition is however inclusive of a 2,700-acre (1,092.6 hectares) freehold land which will be developed into a cargo hub, logistics and high-tech park among others. According to MMC’s press release, the land has a gross development value of about RM9.5 billion. [For more on these acquisitions, go here. You may like to check out MMC's earlier acquisition of Johor Port (go here), where some felt that the shareholders of Johor Port (now privatized) were not fairly treated.]

MMC came under heavy selling, right from the opening bell. As at 4.00 pm, MMC was down 60 sen to RM2.13. Volume traded was more than 15 million units. From the chart below, we can see that the immediate horizontal support is at RM2.10 & thereafter at the psychological RM2.00. A break of the RM2.00 level could potentially see this stock testing the RM1.50-65 support.


Chart: MMC's weekly chart as at August 4th (source: Quickcharts)

For investors who are keen on MMC, I think the safer course of action is to wait for the dusk to settle. We need to see whether the RM2.10 & RM2.00 can hold. In any event, I believe a recovery in MMC share price may take a while.