• Maintain HOLD (TP: RM0.62). Malakoff 12MFY23 core LATAMI of RM887mn was both deemed above our estimate and consensus. 4QFY23 earnings losses widened to RM343mn (vs 3QFY23 LATAMI: RM85mn) on the back of substantial share of loss (RM289mn) from its 40% foreign associate in Bahrain – Al-Hidd Independent Water and Power Producer (IWPP), and impairment loss (RM96mn) on the Group’s carrying value of investment in Al-Hidd IWPP though the fuel margin has turned positive during the quarter. No dividend was declared until the finalisation of Audited Financial Statements in March 2024 for its final dividend. We anticipate earnings to return black in FY2024, driven by gradual stability in global coal prices, proved by positive fuel margin recorded in 4Q23. Maintain HOLD call on Malakoff with a DCF-derived TP of RM0.62.

• Key highlights. Malakoff’s 4Q23 turnover declined 24% YoY due to lower energy payment recorded from Tanjung Bin Power Sdn Bhd (TBP). The said plant was impacted from the steep drop in Applicable Coal Price (ACP) coupled with absence of GB3 Plant contribution that expired in December 2022.

• Earnings Revision. No changes pending management update.

• Outlook. We anticipate a positive turnaround in FY2024, driven by normalisation in coal prices thanks to reduced demand amid global energy transition as the European Union (EU) adoption of alternative energy sources and the growing global renewable energy transition. Notably, the Newcastle coal price at the end of 2023 has retreat to trade under 150USD/MT as per pre-Russian-Ukraine invasion war (Chart 1).

Source: BIMB Securities Research - 26 Feb 2024