PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 22 Sep 2020, 9:57 AM


MEGA FIRST CORPORATION - Time to Monetise Don Sahong Hydropower

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Mega First (MFCB) registered a lower core net profit of RM72.5m (YoY: - 38.7%) for 9MFY19 due to lower construction earnings contribution from the Don Sahong Hydropower project in Laos as the project neared completion. Nevertheless, the results are in line with our and market expectations, making up 74% and 73% of full-year estimates respectively. Construction of the Laos power plant saw a further 2.9% (vs 8.0% in 3QFY18) completed during the quarter, bringing cumulative physical completion to 95% as of Sept-FY19 (vs 71% as of Sept-FY18). Meanwhile, management indicated that it remains confident of seeing the commencement of commercial operation date by end Jan 2020. No dividend was declared for the quarter. Maintain Outperform call with an unchanged TP of RM5.71.

  • 3QFY19 revenue (QoQ: -21.1%, YoY: -42.7%). The group’s overall revenue fell 42.7% YoY to RM125.5m. Contributions from the power segment, solely derived from construction-related revenue in the Don Sahong hydropower project in Laos, saw a decline of 41% YoY to RM61m, due to lower physical progress in the project. Revenue in the resources segment climbed 10.5% YoY to RM40.2m, led by a 7.9% increase in sales of lime products to RM36.2m while sales contribution from calcium carbonate powder doubled to RM1m. The stronger lime product sales were mainly driven by an 8.3% increase in sales volume, bolstered by higher spot demand in the export and domestic markets. Sales from the property segment jumped 72.2% YoY to RM3.6m due to sale of development property units amounting to RM1.6m while rental income remained steady at RM2.1m.
  • 3QFY19 core net profit (QoQ: -33.9%, YoY: -54.4%). The Group’s core earnings halved to RM14.6m, mainly dragged by a substantial drop in construction profit contribution from the Don Sahong Hydropower project given the tail-end stages. Recognition of construction earnings from the power segment fell 62.5% YoY to RM16.4m. Earnings from resources segment rose 19.2% YoY to RM5.4m on higher plant utilization. Property earnings improved by 16.6% YoY to RM2.1m on improved property sales.
  • Potential earnings in the final quarter. Based on the projected 85MW (32% of full capacity) electricity sales for the 1-1/2 month test period, we see potential earnings contribution of USD3m-6m (RM12m-25m) to our FY19 earnings. In addition, it is also expected to see a one-off gain arising from lower interest costs due to the downward revision in the overall project cost to USD401m (RM1.6bn). Given these, we expect 4Q to be a bumper quarter and FY19 numbers could potentially surpass our earnings projection.

Source: PublicInvest Research - 19 Nov 2019

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