• Prai Power Plant’s (350MW) Power Purchase Agreement (PPA) with Tenaga Nasional (TNB) has been extended by a year from 1 September 2024 to 31 August 2025. Prai’s PPA expired in June 2024.

• We view this positively although the earnings contribution is not expected to be significant. Details of Prai’s extended PPA were not announced. Previous PPAs that were extended had tariffs which were reduced by more than 50%.

• Assuming tariffs are reduced by 50%, we estimate that the extension of Prai’s PPA would improve Malakoff’s net profit by 2.6% for FY24E and 5.4% for FY25F.

• In FY23, Prai accounted for 8.1% of Malakoff’s capacity payments. Tanjung Bin Power Plant accounted for 51.5% of Malakoff’s FY23 capacity payments of RM1.9bil while Tanjung Bin Energy Power Plant made up another 31.5%.

• Segari Power Plant accounted for an additional 9% of Malakoff’s capacity payments in FY23. Segari’s PPA is expected to expire in FY27F.

• We estimate that Prai’s extension would raise Malakoff’s DCF by 5% to RM0.79/share. We maintain HOLD on Malakoff with a fair value of RM0.75/share pending the release of its results today.

• Malakoff is currently trading at a FY25F PE of 15.1x, which is slightly higher than its 2-year average of 14x. We attach a neutral 3-star ESG rating to Malakoff.

Source: AmInvest Research - 28 Aug 2024