PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 6 Jul 2020, 10:13 AM


Mega First Corporation - Maiden Energy-Related Earnings

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Full-year earnings of RM105m surpassed our and street expectations, making up 105% and 101% of respective estimates. The company finally recognized maiden energy-related earnings amounting to RM29.7m from sales in the final quarter. A higher final single-tier dividend per share (DPS) of 6sen (vs 4QFY18: 2sen) was proposed for the quarter. It is worth noting that management had made a second downward revision on the construction project cost from USD401m to USD395m, attributed to lower interest costs. Following the completion of the new 500KV transmission line from Don Sahong to the Laos Cambodia border, its 260MW hydropower station has effectively started full commercial operations, and will now provide strong cash flows to the Group. Long-term investors are likely to be rewarded through higher dividend payouts going forward. Our Outperform call is premised on the full commercialization of Don Sahong hydropower project, which makes up 88% of our SOP-based TP of RM6.29.

  • 4QFY19 revenue (QoQ: +55.8%, YoY: -11.5%). The group’s overall revenue fell 11.5% YoY to RM195.5m, mainly due to weaker construction related recognition in the power segment. Contributions from the segment fell 16.6% YoY to RM139.3m given the tail-end stages of the physical progress in the Don Sahong hydropower project, though partly cushioned by the maiden income from energy sales amounting to RM35.1m. To note, energy sale is based on the actual power evacuated by Électricité du Laos (EDL). Revenue in the resources segment climbed 2.4% YoY to RM32.3m, led by a 2% YoY increase in sales of lime products to RM28.6m while other products contributed +5.3% YoY to RM3.7m. Sales volume of lime products grew 5.6% YoY on higher local sales though export sales volume was flat due to sluggish demand. Average selling price of lime products was 3.4% lower. Meanwhile, property sales rose 21.3% YoY to RM3.1 on the back of improved property sales (RM1m) while rental income from PJ8 and Greentown carparks was steady at RM2.1m.
  • 4QFY19 core net profit (QoQ: +135.6%, YoY: +6.8%). Stripping out certain exceptional items, namely, i) downward adjustment to construction profit (RM39.4m) following the review of the project cost and ii) reversal of the deferred tax expenses (RM14m) previously provided for on construction profit following a new income tax law of Lao PDR which was gazetted on 3 Feb 2020, consequently bringing down the corporate tax rate from 24% to 20%, the Group’s core earnings rose 6.8% YoY to RM34.4m, mainly driven by stronger power-related earnings. Despite registering a lower construction profit of RM29.1m (-38.9% YoY), core earnings from the power segment rose 24.2% YoY to RM58.9m, boosted by maiden earnings of RM29.7m from energy sales. Property earnings improved slightly from RM1.3m to RM1.7m. Earnings from the resources segment fell 3.4% YoY to RM3.2m due to lower plant utilization rate.

Source: PublicInvest Research - 26 Feb 2020

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