- BUY Malakoff Corporation with an unchanged fair value of RM2.10/share. Our DCFderived fair value implies an FY15F PE of 26x and a forward dividend yield of 3%.
- Malakoff reported 1QFY15 earnings of RM104mil on the back of revenue of RM1,347mil. This was within our expectations, accounting for 26% of our full-year estimate. No consensus numbers are available.
- The group also declared an interim dividend of 3 sen/share. At the current price, our dividend forecasts for FY15F-FY17F translate into yields of 3.5%-5.1%. We understand that Malakoff will be paying out its dividends in two tranches, an interim in April and a final in September.
- Compared to 1QFY14, its revenue rose by 9% while earnings were higher by 39x. The improved performance was largely driven by:- (1) higher contribution from its Tanjung Bin Power Plant (higher capacity factor: 88% in 1QFY15 and 56% in 1QFY14); (2) consolidation of Port Dickson Power (only fully consolidated beginning April 2014); and (3) lower net interest expenses.
- On a sequential basis, net profit was lower by 13%, which management attributes to the reversal of provision for maintenance arising from scheduled outages at its power plants. Note that its 3Q and 4Q are usually stronger quarters because of the tallying up of unutilised scheduled outage payments from the sole domestic offtaker, Tenaga Nasional Bhd.
- Looking ahead, we expect Malakoff to report seasonally softer earnings in 2QFY15 in view of more scheduled maintenance during the quarter.
- On the progress of its upcoming Tanjung Bin Energy Power, we gather that the variance between its construction vis-à-vis its scheduled completion had now narrowed further to 5%. This is in contrast to the 6.7% it reported just a month ago in its prospectus. Management remains confident of meeting its scheduled COD of March 2016 as the plant is targeted to start grid synchronisation in September 2015.
- All in, we are maintaining our FY15F-FY17F earnings estimates. At the current price, the stock is trading at an FY15F PE of 21.5x.
Source: AmeSecurities Research - 28 May 2015
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