Malakoff’s 1QFY22 core net profit came in at RM57.0m (-14.4% YoY, +>100% QoQ) which only contributed 18% and 19% of our and consensus full year estimates respectively. However, we deem the results to be within expectations as subsequent quarters will see stronger earnings given that the Tanjung Bin Energy (TBE) power plant has resumed operations in mid February. To recap, TBE was affected by forced outages from 3 November 2021 to 13 February 2022 due to damages in the blades of the turbine which have been modified and used while waiting for new blades to arrive from Germany in 2HFY22. We understand that the Group is also discussing with its insurance company on compensation proceeds. All told, we keep our earnings unchanged and maintain our Outperform call with a DCF-based target price at RM1.02.

• 1QFY22 revenue rose 39.4% YoY to RM1.88bn, primarily due to higher energy payments recorded from Tanjung Bin Power (TBP) and TBE given the higher applicable coal price (ACP). The Group recorded higher profit before taxation of RM98.2m, a slight increase of 1.6% YoY from RM96.7m mainly due to higher contribution from TBP given the higher ACP as well as higher contributions from Alam Flora Sdn. Bhd. (AFSB), and foreign investments in associates and joint ventures. However, these were partially offset by lower contribution from TBE which was impacted by the plant outage caused by Low-Pressure Turbine blade failure, coupled with higher depreciation charges

• Net Zero Carbon Emissions by 2050, which the Group aspires to achieve amid the country’s transition towards energy efficient sources such as gas and renewables and continues to focus on the growth of its sustainable business operations. The Group’s solar portfolio currently stands at 39 MWp, translating to a total carbon avoidance of 30,601 MT/year. To date, the Group has successfully achieved Commercial Operations for rooftop solar projects with a capacity of 11 MWp. On the Environmental Solutions front, Alam Flora has completed the physical works of its 120-tonne per day Construction and Development Waste Facility in the state of Pahang. The facility is expected to commence operations in 2HFY22.

Source: PublicInvest Research - 25 May 2022