• The largest independent power producer (IPP) in Malaysia and in ASEAN. Malakoff (listed in May 2015 at IPO price RM1.80) is an IPP and water producer. It currently owns power generation assets (over 6,036 MW) with a total effective generation capacity comprising 5,346 MW in Malaysia, 480MW in the Middle East North Africa (MENA) region and 210MW in Australia, and water production capacity of 358,850 cu m/day in the MENA region. A successful take off of the Tanjung Bin power plant (contribution from 2Q17 onwards) will boost its effective generating capacity by 17% to 7,036MW by end-2017/2018.

• In Malaysia, it is the 2 nd largest IPP with a market share ~18%, after TNB (market share ~39%). In terms of being a “pure-play” IPP (which excludes TNB) in West Malaysia, Malakoff is the market leader with a ~24% market share.

• Values emerge after recent selldown. From a 52-week high of RM1.80 (18 Aug), Malakoff’s share prices tumbled 37% to a low of RM1.14 (28 Feb) before closing at RM1.24 yesterday. We opine that the slump in share prices provides a good buying opportunity for LT investors as Malakoff offers strong cashflow and resilient earnings with attractive dividend yield of 5.2%.

• Following one month of sideways consolidation, we believe Malakoff is ripe for further relief rally, supported by bullish daily technical and downtrend line breakout. A strong breakout above immediate resistance of RM1.28 (20-w SMA) could take the next leg up towards RM1.38 (38.2% FR) before testing our LT objective at RM1.46 (50% FR). On the flip side, key supports are situated at RM1.19 (10-d SMA) and RM1.16 (daily lower Bollinger band). Cut loss at RM1.15.

Source: Hong Leong Investment Bank Research - 4 Apr 2017