Malakoff: Sees a better 2HFY18 Hold

Maintain HOLD on Malakoff Corporation with an unchanged DCF-based fair value of RM0.89/share (WACC: 7.6%). Our fair value of RM0.89/share implies an FY19F PE of 16.7x. Malakoff is currently trading at a FY19F PE of 15.5x vs. Tenaga Nasional’s 10.8x and YTL Power’s 23.4x.

We have reduced Malakoff’s FY18F net profit by 7.0% to account for a higher effective tax rate of 45% vs. 31% previously. Malakoff’s effective rate is expected to increase in FY18F (FY17: 36%) due to the payment of dividends to a subsidiary, which are not tax deductible.

In spite of the downward revision in earnings, we expect Malakoff’s earnings to be better in 2HFY18 compared with 1HFY18. The earnings enhancement is anticipated to be underpinned by margins improvement and fewer unplanned outages at the Tanjung Bin Energy Power Plant.

RETAIL RESEARCH

Stocks On Radar: Hartalega, Top Glove, SKP Resources, Malaysian Pacific Industries

NEWS HIGHLIGHTS

Ideal United Bintang: Shareholders to inject assets of RM353m

SP Setia: Sees strong property demand in Melbourne

Diversified Gateway Solutions: Plans capital reduction

Aturmaju Resources: To raise up to RM10m via rights issue to fund IT venture

Source: AmInvest Research - 16 Oct 2018