Malakoff Corporation Berhad - Higher TBE & Associates’ Contributions

Date: 19/08/2020

Source  :  PUBLIC BANK
Stock  :  MALAKOF       Price Target  :  1.06      |      Price Call  :  BUY
        Last Price  :  0.895      |      Upside/Downside  :  +0.165 (18.44%)

Malakoff reported higher net profit in 2QFY20 at RM105m (+101% YoY). The results came in above our and consensus forecasts with 1HFY20 net profit accounting for 70% and 65% of full year estimates respectively. Earnings for the quarter was higher primarily due to higher contribution from Tanjung Bin Energy (TBE) following shorter duration of plant outage and one-off settlement agreement with GE, contribution from Alam Flora as well as higher contribution from associates. We raise our forecasts by an average of 9% for FY20-22F, to account for higher associates’ contribution. Our Trading Buy call on Malakoff is retained, with unchanged target price of RM1.06. During the quarter, Malakoff declared an interim dividend of 2.80 sen at 70% payout ratio.

  • Revenue declined 17% YoY from lower energy payment. Revenue for 2Q20 declined by 17% YoY to RM1.5bn mainly owing to lower energy payment recorded from Tanjung Bin Power (TBP) (-39%) and Segari Energy Ventures (SEV) (-95%), following the decline in Applicable Coal Price (ACP) and lower despatch factor respectively. This however was moderated by contribution from Alam Flora following the completion of the acquisition in December 2019 and higher energy payment from TBE given shorter duration of plant outage. To recap, TBE was undergoing 73-day scheduled maintenance outage in 2Q19. For 1H20, revenue declined 12% YoY to RM3.3bn.
  • Higher pre-tax profit amid better TBE & associates’ contribution. Despite lower revenue, EBIT in 2Q20 was flat YoY at RM254m (+0.8%) due to contribution from Alam Flora and higher contribution from TBE following shorter duration of plant outage and one-off settlement agreement with GE (in relation to losses and damages incurred at TBE between April 2017 to June 2019). Meanwhile, pre-tax profit in 2Q20 jump 49% YoY to RM163m as a result of lower net finance cost (-7% YoY) and higher contribution from associates’ and JVs. For 1H20, pretax profit jump 33% YoY to RM303m.
  • Higher associates and JVs contributions was after acquiring an additional 12% stake in Shuaibah IWPP in September 2019, as well as in the absence of share of losses from its 40%-stake Kapar Energy Ventures (KEV) following impairment of the carrying amount of investment at the end of FY19. Overall, net profit in 2Q20 was double YoY to RM105m, bringing its 1H20 net profit to jump 63% YoY to RM194m.
  • Dividend. Malakoff declared an interim dividend payout of 2.80 sen, which translates to a lower payout ratio of 70% (vs 2.44 sen at 100% payout in 2Q19).

Source: PublicInvest Research - 19 Aug 2020

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