Malakoff Corporation Berhad is engaged in investment holding activities. The Company is an independent power and water producer based in Asia.
Its business includes power generation, water desalination, and operation and maintenance services. It operates in two segments: Asset management,which is engaged in managing assets to achieve the return and the process of monitoring and maintaining facilities systems, and Operations and maintenance, which is engaged in providing repair and maintenance services for all the power plant equipment within the Company.
In Malaysia, it owns a generation capacity of approximately 5,346 megawatts consisting of over six power stations. It provides project management services for in-house and external projects. The Company, through its subsidiaries, is engaged in the design, construction, operation, and maintenance of a combined cycle power plant, generation and sale of electrical energy, and generating capacity of the power plant.
Annual Report 2020
A key expansion strategy Malakoff is focusing on to provide clean energy solutions is venturing into the Renewable Energy (“RE”) segment. We secured three key rooftop solar projects during the year, the 2.66 MW project for Johor Port Berhad on 10 June 2020, the 4.93 MW project for Northport (Malaysia) Berhad on 4 September 2020, and the 2.34 MW project for PMB Properties Sdn Bhd on 30 October 2020.
Following the Feed-In-Tariff (“FiT”) approvals for two small hydro projects that were awarded to our Special Purpose Vehicles (“SPVs”) Batu Bor Hidro Sdn Bhd and Lubuk Paku Hidro Sdn Bhd by the Sustainable Energy Development Authority (“SEDA”) in December 2019, these SPVs have now entered into its respective Renewable Energy Power Purchase Agreement (“REPPA”) with Tenaga Nasional Berhad (“TNB”) with a targeted project completion date of April 2025. We were also successful in the bid for a second biogas power plant in Johor by our subsidiary, Southern Biogas Sdn Bhd (“SBSB”) in November 2020.
DATUK HAJI HASNI HARUN
Chairman
Expansion in the RE segment will be a key priority as the Group
ANWAR SYAHRIN ABDUL AJIB
pursues solar, small hydro, biogas and WTE projects, in line with
the Government’s target to increase the country’s RE capacity mix
to 20.0% by 2025
Managing Director/Chief Executive Officer (“MD/CEO”)
Earning
Valuation
Affin Hwang TP: RM0.86 (HOLD)
Given the weaker-than-expected performance, we are lowering our EPS forecasts by 4.0%-17.8% to factor in the latest quarterly performance. We continue to believe that the growth outlook for MLK will remain challenging, as the government is unlikely to issue any new tenders for conventional power plants until 2023/24. As such we are keeping our HOLD call but with a lower SOTP-based TP at RM0.86. Downside risk: unplanned power outages at MLK’s power plants; upside risk: new power plant project wins.
Maybank : TP RM 0.85 (HOLD)
We now assume an 85% payout ratio going forward (from 100% previously, thus saving Malakoff c.MYR50m annually), which is within the company’s 70% payout policy. Consequently, our FY21/22/23 net profit forecasts are raised marginally by 0%/1%/2% respectively. Our MYR0.85 TP (based on a sum-of-parts with each entity valued on a DCF assuming 7.5% WACC) is unchanged.
Ambank : TP RM0.95 (HOLD)
We maintain HOLD on Malakoff Corporation with an
unchanged fair value of RM0.95/share (WACC: 7.5%).
Malakoff is currently trading at FY21F PE of 13.0x and
FY22F PE of 12.7x. We ascribe a 3-star ESG rating to
Malakoff.
PUBLIC INVESTMENT : TP: RM1.02 (Trading Buy)
Malakoff’s 1QFY21 headline net profit came in at RM73.9m (-28.5% YoY,
+77.5% QoQ), the weaker YoY number primarily attributed to lower
contributions from Tanjung Bin Power Sdn Bhd (TBP) and Tanjung Bin
Energy Sdn Bhd (TBE) coal plants given the decline in applicable coal
price (ACP), lower contribution from Segari Energy Ventures (SEV) gas
plant following decrease in despatch factor, higher operation and
maintenance costs as well as lower contributions from foreign investments in associates.Excluding one-off items in 1QFY21 consisting of mainly net impairment losses, its core net profit is estimated at RM80m, which is within our and consensus full year estimates at 28% and 25% respectively. Our DCF-based target price is maintained at RM1.02 with Trading Buy
call also retained.
KENANGA: TP: RM1.050 (OUTPERFORM)
Maintain OUTPERFORM with unchanged target price of RM1.05,
which is based on 20% holding company discount to its SoP of
RM1.31. Our recommendation is premised on its attractive valuation
coupled with above average dividend yield of >5%. Risk to our
recommendation is unplanned outages leading to lower-thanexpected earnings.
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