Investment Highlights

• We maintain BUY on Malakoff with an unchanged DCFbased fair value of RM0.75/share (WACC: 7.5%), implying a FY24F PE of 14x. We ascribe a neutral 3-star ESG rating to Malakoff.

• We visited Malakoff’s integrated recycling facility in Putrajaya yesterday. The facility, which commenced operations in August 2019, has a recycling capacity of 300- 400 tonnes of waste per month. Here are the key takeaways from the site visit: -
  ➢ Outlook for the waste management industry in Malaysia is positive as the volume of waste increases every year on the back of urbanisation and a growing population. The volume of waste in Malaysia is forecast to rise by 35.7% to 19mil tonnes in 2050F from 14mil tonnes in 2021.
  ➢ The bulk of the waste in Malaysia is food. We understand that food products account for 45% of waste in Malaysia while plastics make up another 13%. An additional 12% of waste consists of diapers or sanitary products while paper makes up another 9%.
  ➢ As there are only 29 landfills classified as sanitary in Peninsular Malaysia, there is a shift towards waste-toenergy plants (WTE) as they are more environmentally friendly. As such, the government is planning to build 22 WTE plants in Malaysia.
  ➢ 4 WTE contracts have already been awarded and another 3 will be open for bidding in 2024F. These are Semeling in Kedah, Seelong in Johor and Kuantan in Pahang. We believe that Malakoff is well-positioned to win WTE contracts in Malaysia due to its experience and expertise in waste management.
  ➢ Apart from WTE, there are also opportunities in the nonconcession and facility management businesses. Alam Flora is exploring plans to set up port reception facilities in Johor together with a sustainable facility and eco park centres in Perak and Terengganu.

• Malakoff is currently trading at a FY24F PE of 12x, which is below its 2-year average of 14x. FY24F dividend yield is also compelling at 8%.

Source: AmInvest Research - 21 Nov 2023