Investment Highlights

• We maintain BUY on Mega First Corporation (MFCB) with an unchanged fair value of RM3.60/share, based on FY24F PE of 8x, which is the 2-year average. We ascribe a 3-star ESG rating to MFCB.

• Here are the key takeaways from MFCB’s briefing last Friday: -

• MFCB’s capex in respect of the CGPP (Corporate Green Power Programme) is estimated to be RM120mil-RM150mil. There is no PPA or concession period. Instead under the CGPP, the tariff will fluctuate based on the new enhanced despatch agreement (NEDA) system.

• We believe that the IRR of the project under CGPP is favourable as the cost of solar panels has declined by 40% from the peak of US$0.30/kWh. Recall that MFCB won 30MW or 46.5MWp of solar exports under the CGPP. Depending on the prices, solar panels comprise 40%-60% of the project cost.

• DSHP’s (Don Sahong Hydropower Plant) 5th turbine is 60% completed. It is on track for commissioning in 3QFY24. MFCB is currently negotiating on the PPA for the 5th turbine with the Laos government. The 65MW 5th turbine is estimated to cost US$70mil-US$75mil in total.

• The 5th turbine is expected to act as a spare to the existing turbines when they undergo major maintenance in FY25F. Also, the 5th turbine will only operate during the wet season.

• We understand that Edenor Technology’s poor performance in 2QFY23 was due to the loss of capacity when the plant was shut down for major maintenance works. There is no issue with demand. As the plant is small, Edenor does not face problems filling up orders. Hence, Edenor’s operations are expected to improve in 2HFY23.

• MFCB is currently trading at an attractive FY24F PE of 8x, which is lower than the 5-year average of 10x.

Source: AmInvest Research - 28 Aug 2023