Investment Highlights

• We maintain HOLD on Malakoff with an unchanged fair value of RM0.95/share (WACC: 7.5%). We ascribe a threestar ESG rating to Malakoff.

• Malakoff is currently trading at FY22F PE of 12.5x and FY23F PE of 12.4x. We forecast Malakoff’s FY21E gross DPS to be 5.5 sen, which implies a yield of 6.6%.

• Malakoff’s annualised 1HFY21 net profit was within our forecast but slightly above consensus estimates. After a weak 1QFY21, Malakoff’s core net profit rebounded by 86.1% to RM123.9mil in 2QFY21 on the back of a 121.3% surge in the share of net profits in associates. Recall that in 1QFY21, the associates were hit by planned outages.

• Malakoff’s core net profit (ex-impairment on financial assets of RM12.2mil) edged down by 1.9% YoY to RM190.4mil in 1HFY21 due to a 2.3% fall in the share of net profit in associates (mainly Shuaibah assets in the Middle East) and a higher effective tax rate of 28.8% (1HFY20: 27.9%).

• Malakoff’s revenue declined by 10.5% YoY to RM2.9bil in 1HFY21 dragged by lower energy payments. In Malaysia, Malakoff was affected by planned outages at the TBE power plant in 1QFY21.

• Comparing 2QFY21 against 1QFY21 however, revenue improved by 17.3% to RM1.6bil. We believe that the equivalent availability factor (EAF) at TBE had normalised to more than 90% in 2QFY21 as operations resumed after the planned outages in 1QFY21. TBE’s EAF was 60% in 1QFY21.

• We think that Alam Flora’s net profit rose by RM3.0mil to RM6.0mil YoY to a range of RM30.0mil to RM35.0mil in 1HFY21 underpinned by stable demand for sanitisation works. We estimate that Alam Flora accounted for more than 20% of Malakoff’s core net profit in 1HFY21.

• Most of Malakoff’s capacity payments come from the TBE and TBP power plants. TBE accounted for 30.1% of Malakoff’s capacity payments in 1QFY21 while TBP accounted for a larger 46.3%. The remaining 23.6% of Malakoff’s capacity payments came from the Prai, GB3 and Segari power plants.

Source: AmInvest Research - 23 Aug 2021