• Malakoff Corporation Bhd (Malakoff) announced the successful achievement of financial closure for RP Hydro (Kelantan) Sdn Bhd, amounting to RM975mn in nominal value, through the issuance of ASEAN Green SRI Sukuk Wakalah (“ASEAN Green SRI Sukuk Wakalah”).

• While we maintain our earnings forecast, we anticipate that the company's commitment to expanding the renewable energy (RE) sector will have a positive impact, partially compensating for the revenue loss in the power generation segment.

• Reiterate a BUY call on Malakoff with unchanged TP of RM0.79 which implies 11x FY23F P/E.

Malakoff First Entry into the Hydropower Generation Business

To recap, in March 2023, Malakoff disclosed its Definitive Agreements with Rising Promenade Sdn Bhd and RP Hydro, encompassing the development, ownership, operation, and maintenance of three runof-river small hydropower plants: Kemubu Small Hydropower Plant (SHP), Kuala Geris SHP, and Serasa SHP. These plants have a combined installed capacity of 29 MW, 25 MW, and 30 MW respectively, totalling 84 MW, located in the Kuala Krai District of Kelantan.

Achieved Financial Close on Small Hydropower Project

Malakoff on 14th July 2023, announced its achievement of a financial closure for RP Hydro (Kelantan) Sdn Bhd, securing a nominal value of RM975mn by issuing ASEAN Green SRI Sukuk Wakalah. The project's financing will be accomplished through a combination of ASEAN Green SRI Sukuk Wakalah and shareholders' equity contribution, based on a Finance-to-Equity Ratio (FE Ratio) of up to 80:20. With the successful achievement of financial close, the Group now can aim to fully commence construction works on the project (expected COD in Dec 2025 with single digit IRR). Malakoff has set a long-term target of achieving an RE capacity of 1,400 MW by 2031 with key focus in the solar, small hydro and Waste-to-Energy (“WTE”) segments. At present, the Group’s RE portfolio are only coming from solar which stands at 39 MWp, translating into a total carbon avoidance of 30,601 MT/year. All in all, we view its robust expansion from the RE segment positively as it will slightly make amends for revenue loss from the power generation segment.

No Change to Earnings Forecast

We make no changes in our earnings forecasts pending guidance from management.

Maintain a BUY call with Unchanged TP RM0.79

We maintain Malakoff as a BUY with unchanged TP of RM0.79 which implies 11x FY23F P/E.

Source: BIMB Securities Research - 16 Jul 2023