• Overview. Malakoff’s FY22 revenue escalated by 60.2% YoY to  RM10.4bn stemming from higher energy payments from Tanjung Bin Power Sdn Bhd (“TBP”) and Tanjung Bin Energy Sdn Bhd (“TBE”)  thanks to higher Applicable Coal Price (“ACP”). Concurrently, core earnings rose by 1.9% YoY to RM302.2mn owing to higher contribution from TBP, insurance claims on the forced outage at  TBE’s power plant, share of profit from associates and joint ventures as well as the absence of write-off from Segari Energy Ventures Sdn  Bhd (“SEV”)’s due to its deferred expense in FY21.

• Key highlights. FY22’s Alam Flora earnings dwindled by 62.6% to  RM72.4mn (FY21:RM193.4mn) hampered by higher maintenance costs due to its ageing fleet and absence of gains arising from the remeasurement of financial liabilities in FY21.

• Against estimates: Below. 12MFY22 core profit of RM302.2mn was below our forecast, accounting 80.3%, however above consensus at  160.8% respectively.

• Outlook. We reckon the group’s earnings outlook to continue to be driven by near term higher-than-expected energy payments from the  Tanjung Bin Power (TBP) and Tanjung Bin Energy (TBE) plants on the back of higher applicable coal price (ACP), supported by prolonged disruption in global supply chain. Apart from that, we are also positive on its Renewable Energy (RE) and Environmental Solution segment which may start to pay off soon.

• Our call. Reiterate a BUY call on Malakoff with TP of RM0.87 which implies 9.8x FY23F PER.

Source: BIMB Securities Research - 24 Feb 2023