Malakoff’s 2QFY22 core net profit came in at RM125.3m (+1.1% YoY, +>100% QoQ) which was within our forecast but slightly above consensus estimates. Group 1HFY22 net profit of RM182.3m (-4.3% YoY) constituted 57% and 63% of our and consensus full year estimates. We deem it as in line as we expect Malakoff’s 2HFY22 earnings to moderate. Recall that Tanjung Bin Energy (TBE) power plant has resumed operations in mid-February. 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. 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.

• 1HFY22 revenue rose 43.1% YoY to RM4.2bn, primarily due to higher energy payments recorded from Tanjung Bin Power (TBP) and TBE on the back of the higher applicable coal price (ACP). Correspondingly, the Group recorded higher PBT of RM294.8m (+2.9% YoY) primarily due to higher contribution from TBP given the higher ACP, lower net finance costs as well as higher contributions from foreign investments in associates and joint ventures. However, these were partially offset by lower contribution from TBE impacted by the reduction in capacity income following plant outage caused by Low-Pressure Turbine blade failure coupled with higher operation and maintenance costs.

• 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 - 24 Aug 2022