• Malakoff Corporation’s Alam Flora Sdn Bhd has proposed to acquire a piece of land in Bandar Sultan Sulaiman, Klang, measuring 23,370 sq metres with two single-storey detached warehouses for RM25.0mil from Media Prima Bhd.

• The property is located adjacent to Northport Bhd, Westports Malaysia Sdn Bhd and the future development of Pulau Carey Port. It is accessible from the Klang town centre via Jalan Kapar.

• The purchase consideration was based on the independent valuer’s appraisal of the land of RM25.0mil.

• Alam Flora plans to develop a recovery facility on the land. The total development cost of the recovery facility is expected to be RM130.0mil over 42 months.

• The recovery facility will serve as an off-site facility to handle various types of waste. It will also help expand Alam Flora’s environmental business.

• We are neutral on this development in the short term. We believe that the construction of the recovery facility will take time as the regulatory approval process and construction activities are currently slow due to MCO 3.0. Hence, earnings contribution from the recovery facility will not be immediate.

• In the long term, we believe that the expansion of Alam Flora’s business is positive as Malakoff seeks to increase earnings contribution of renewable and green assets. In FY20, Alam Flora accounted for 19.9% of Malakoff’s reported net profit.

• We reckon that financing the RM25.0mil land acquisition and RM130.0mil development of the recovery facility would not be an issue as Malakoff’s gross cash and other investments stood at RM4.5bil as at end-FY20.

• We maintain HOLD on Malakoff with a fair value of RM0.95/share.

Source: AmInvest Research - 16 Jul 2021