Mega First reported a strong core earnings of RM339m for FY21, up 5.3% YoY. The steady results were in line with our and market expectations, accounting for 96% and 97% of full-year numbers respectively. The average energy availability factor (EAF) for the Don Sahong hydropower stood at 91% compared to 86.4% in 2020, led by improved water flow management and a more effective power distribution system following the completion of EDL’s 500KV transmission line from Ban Hut substation to the Cambodian border in Nov 2020. A final dividend per share (DPS) of 3.5sen was declared for the quarter, bringing full-year DPS to 35.8sen. Maintain Outperform call with an unchanged TP of RM4.36.

• 4QFY21 revenue (QoQ: +21%, YoY: +31%). During the quarter, the Group’s revenue rose 31% YoY to RM281m, boosted by stronger sales contributions from all core businesses. The stronger renewable energy sales (YoY: +5.5%) were led by a 4.6% increase in hydro energy sales in Laos to RM145m while solar energy sales surged from RM0.1m to RM1.4m following the commissioning of an additional 13.1MW rooftop solar projects during the quarter (4QFY20: 1.48MW).
  Meanwhile, resources sales rose 6.4% YoY to RM43m, attributed to a 4% increase in sales of lime products from RM37m to RM38.4m while sales from other products jumped 32% to RM4.9m on higher sales of limestones. Lime product sales volume rose 4.5% YoY on stronger local demand, which more than offset a 3% decline in export volume. Domestic demand was driven by the resumption of local economic activities while high shipping rates dampened the price competitiveness of the Group in selected export markets. The average selling price of lime products slipped 0.5% due to a change in the customer sales mix, which more than offset the effects of upward price adjustment and favourable FX movements.
  Packaging sales jumped 192% YoY to RM84m due to an RM49.5m contribution from Stenta and improved sales performance by Hexachase, which posted a growth of 20% YoY to RM34.6m on higher sales of paper bags and flexible packaging products in both the domestic and export markets.

• Core earnings remained at RM93m. Stripping out the one-off gain from the share of profit in JV (arising from the Group’s unallocated bargain difference of RM125.1m following the acquisition of Emergy Oleochemical S/B and Emery Specialty Chemicals S/B by JV Edenor Technologies S/B on 1st Nov 2021), the Group’s core earnings remained at RM93m. The jump in packaging earnings more than offset a drop in both renewable energy and resources segments. Excluding project cost writeback totaling RM8.2m in 4QFY20, the renewable energy pre-tax earnings would have improved by 6.5% YoY. Resources earnings fell 20% YoY to RM4.3m, dragged by higher fuel costs and kiln repair expenses. Packaging earnings jumped 179% YoY to RM10.7m, bolstered by an RM6.3m contribution form Stenta and a 16% improvement by Hexachase to RM4.4m despite seeing higher raw material costs, which the company was unable to fully pass on to customers.

Source: PublicInvest Research - 28 Feb 2022