• Malakoff Corporation has proposed to sell its 65% stake each in Batu Bor Hidro Sdn Bhd and Lubuk Paku Hidro Sdn Bhd to Touch Meccanica Sdn Bhd for RM2.0mil cash.

• Touch Meccanica holds the remaining 35% stake in each of the two hydro projects in Sungai Pahang.

• We understand that the gain/loss on the proposed disposal is negligible as Malakoff had only spent money on the due diligence. Construction of the dams has not commenced yet.

• We believe that Malakoff is selling its stake in the two hydro projects as the group’s priority and focus is on the solar business.

• Batu Bor Hydro power plant was supposed to command a generating capacity of 30MW upon completion while Lubuk Paku’s generating capacity would have been 25MW.

• Excluding the two hydro power plants, Malakoff’s exposure to renewable assets would be about 42.7MW currently instead of almost 100MW.

• Most of the 42.7MW renewable assets consist of solar rooftop projects for the DRB Hicom group of companies, Pos Malaysia and Northport.

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

Source: AmInvest Research - 12 Aug 2021