MARC Ratings has affirmed its rating of AA-_IS on MMC Corporation Berhad’s (MMC) Sukuk Murabahah Programme of up to RM3.5 billion. The rating outlook is stable. As of 28 November 2025, the Sukuk Murabahah has an outstanding of RM2.1 billion.

MMC’s strong competitive position and longstanding track record across key sectors of the economy, namely ports and logistics, engineering, and energy and utilities, remain the primary rating drivers. The rating is moderated by the exposure of its port operations to fluctuations in global trade flows, as well as the potential increase in borrowings at the port operating subsidiaries, which could reduce residual cash flow buffers and, hence, dividend upstreaming capacity to the holding company.

The port and logistics division remains the group’s largest earnings contributor. With a combined annual maximum container handling capacity of 24.1 million twenty-foot equivalent units (TEUs) as at end-5M2025, MMC retains its position as the largest port operator in Malaysia, ranked among the top 10 globally in terms of handling capacity. Its domestic ports, strategically located along the Strait of Malacca, operate under long-term concessions through 2055, providing strong visibility of sizeable future cash flows. The ports benefit from MMC’s ongoing investment in infrastructure and digitalisation, which enhances operational efficiency and capacity. During 5M2025, MMC’s ports handled a combined 8.1 million TEUs of container cargo and 14.7 million FWT of conventional cargo. Its large scale, diversified cargo base, and strategic role in national and regional trade corridors underpin the group’s resilient and defensive earnings profile.

The engineering division replenished its order book after being awarded the RM1.5 billion Phase 1 paddy cultivation infrastructure project in Kedah by Muda Agricultural Development Authority (MADA), bringing total outstanding orders to nearly RM1.9 billion as at end-1H2025. The multi-phased MADA project has an estimated total value of RM3.6 billion, with the first phase comprising the development and construction of irrigation blocks, the rehabilitation of the Pedu Dam, and the construction of a canal for water transfer. This contract provides some construction earnings visibility at a time when the rollout of major civil infrastructure projects has remained slow. The group continues pursuing new railway-related tenders while undertaking internal engineering works at port subsidiaries Pelabuhan Tanjung Pelepas Sdn Bhd (PTP), Johor Port Berhad and Northport (Malaysia) Bhd. MARC Ratings views MMC’s strong execution track record for large-scale infrastructure projects as a key strength, positioning the group well to secure additional public infrastructure contracts moving forward.

MMC’s energy and utilities division primarily comprises investments in associates, namely Malakoff Corporation Berhad (Malakoff) and Gas Malaysia Berhad. Malakoff has an effective generation capacity of 5,930MW in Malaysia, accounting for about 22.4% of total electricity generation in Peninsular Malaysia. Its power portfolio includes five power plants held through four subsidiaries and a 40%-owned foreign associate. Gas Malaysia, meanwhile, is an investment holding company whose key subsidiary owns, develops, operates, and maintains a natural gas distribution pipeline network. The subsidiary operates under a 20-year distribution licence that is valid until January 2040.

In 1H2025, group pre-tax profit increased by 38.2% y-o-y to RM595.6 million, supported by a 14.8% rise in revenue to RM2.8 billion. The improved performance was driven by higher contributions from major ports and logistics operations, and increased land sales in Senai Airport City in Johor. Earnings growth going forward could be driven by port tariff hikes recently approved by the government.

At the holding company level, after the completion of the KVMRT Putrajaya Line project, revenue has been mainly derived from dividend income. In the absence of sizeable construction earnings, pre-tax profit was lower at RM484.9 million in 2024. Total borrowings declined to RM2.8 billion, reflecting ongoing repayments. Debt-to-equity ratio was lower at 0.36x, underpinned by a larger equity base following the full capitalisation of the shareholder’s advance into ordinary shares and redeemable convertible preference shares.

While capex is expected to be sizeable at the port subsidiary level, particularly at PTP, its strong cash flow generation with cash flow from operations of RM812.5 million in 2024 (in line with its five-year average), along with the cash flow performance of other port subsidiaries, supports their continued ability to upstream dividends.