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12 July 2024

- My latest gems still laggard. Data Center's need renewable energy procuder.

- YES! TNB (TENAGA) is the big one. But MALAKOFF is the next one.

STOCK NAME : MALAKOFF CORPORATION BERHAD (5264

Malakoff speciality in Power Plant Operation, Water Desalination, Independent Water and Power Producer (IWPP), and Power Plant Maintenance, Repair & Overhaul, CCGT, OCGT, and coal-fired power plants, as well as water desalination facilities and solar photovoltaic systems, require operations and maintenance. Malakoff subsidiary's MUSB is one of Malaysia's largest owners and operators of power distribution and district cooling plant infrastructure. With the acquisition of Alam Flora, Malakoff will now focus on developing Waste-to-Energy projects.

MALAKOFF SERVICES

• Malakoff's core expertise includes Thermal Power Generation, Renewable Energy (solar, mini hydro, biogas, waste-to-energy) Water Desalination, Environmental & Waste Management, Operations & Maintenance and Electricity Distribution & District Cooling System.

• Malakoff's capability and extensive experience include the following:

• Project Development

• Project Financing

• Project Management

• Commissioning

• Operations & Maintenance (O&M)

• Repair & Overhaul

• Asset & Risk Management

• Electricity Distribution & District Cooling System

• Engineering Support

• Health, Safety & Environment

• Technical Training

• Plant Assessment Study & Technical Audit

KIM'S TARGET PRICE

• Current Price : 0.825 sen (Undervalued)
• TP1 : RM1.10
• TP2 : RM1.50
• Fair Value :  RM3.50
• Kim's TP : RM2

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KIM'S VIEW

• Malaysia has also set up the Energy Exchange Malaysia (ENEGEM)
• ENEGEM is trading in green electricity supply to Singapore
• ENEGEM is inviting bids for a 100 MW pilot project using existing infrastructure between the two countries.
• The pilot project is a positive move for Malaysia’s RE sector as it paves way to Malaysia exporting RE to Singapore.
• The latest LSS4 had tariffs between 17.68 sen to 24.81 sen/kWh. In Singapore, regulated electricity tariff stands at SGD0.2988/kWh before GST (c.RM1.039/kWh) for 3Q2024.
• In my opinion, the export of RE to Singapore will increase the tariffs for solar asset owners in Malaysia vis-à-vis those of LSS Programme.
• Other than solar EPCC contractors, ENEGEM will benefit asset owners such as TENAGA and MALAKOF due to the arbitrage opportunities.
• Malakoff’s decarbonisation efforts are well underway as TBP’s biomass co-firing project. Project under (NETR).
• IPP to TPA a boon for Malakof. IPPs can sell electricity to customers without going through TENAGA but would need to use TENAGA’s transmission lines and pay TENAGA the associated wheeling charges.
• Awaiting decision for Prai PPA extension.
• Malakoff's recorded profit before taxation of RM119.8 million in the current quarter as compared with loss before taxation of RM309.8 million reported in the immediate preceding quarter.
• My TP minimum is RM1.50. Currently is undervalued.

Beneficiary of the data centre (DC) boom in Malaysia :

• Bullish on the prospects of the real beneficiaries of the DC boom in Malaysia.
• The contractors being given jobs to construct parts of the DC buildings and even energy providers like Tenaga Nasional Bhd (TNB) and their subcontractors.
• The local DC market, according to a report, is forecast to grow at a six-year compounded annual growth rate of 13.9% from US$1.8bil in 2023 to US$4bil by 2029.
• There were big players in construction sector beneficary in DC and tech/hardware-related companies, but i am focus to another one for now.
• It's MALAKOFF & TNB. So my picked are MALAKOFF which is UNDERVALUED.
• With DCs requiring tremendous amounts of electricity. I am positive on TNB, Malakoff Corp Bhd and other listed electricity producers.
• The preferred energy source for DCs is renewable energy and I am expects more electricity supply agreements with DC companies to be signed over the next 12 months.
• DCs will drive electricity demand. Domestic demand for electricity recorded a new high of 20,028MW in April 2024 with strong commercial demand due to DCs coming on stream in the first quarter of 2024.
• By the way, the share price outperformance of TNB and TELEKOM, which is one of the largest DC operators in Malaysia, I presume we could see the FBM KLCI move up to 2,000 points ny next year.
• So my gems is MALAKOFF as my target price above RM1.50 soonest as possible.
• Catalyst estimates that Peninsular Malaysia may need to add 17 to 21 gigawatts (GW) of power generation capacity over the next 10 years to meet increased power demand and maintain ample power reserves.
• The bank continues to be bullish on Tenaga Nasional Bhd (TENAGA), Main Board Utilities) and (MALAKOF), Main Board Utilities) as these two companies may be candidates for short-term power purchase agreement (PPA) bids between the government and the industry. of potential beneficiaries.

Malakoff buying into Malaysian firms to grow renewables ops

• The group has sealed a conditional deal to acquire stakes in two domestic companies, thus boosting its effective renewable energy capacity to 128 MW.
• Malakoff will pay Zelleco Engineering Sdn Bhd MYR 27 million (USD 5.7m/EUR 5.3m) for the two stakes.
• ​Malakoff will acquire a 51% stake in ZEC Solar Sdn Bhd, a Malaysian solar developer and electricity retailer which owns a 29-MW photovoltaic (PV) project in the Kota Tinggi District of Johor state. The scheme was among the winners in the first round of Malaysia’s large-scale solar programme and has a 21-year power purchase (PPA) in place through 2040.
• The proposed purchase of 22.4 million ordinary shares of ZEC Solar will entitle Malakoff to a roughly 15 MW ownership in the PV project.
• Additionally, the energy major will buy 49% of power plant operator and electricity producer TJZ Suria Sdn Bhd by taking hold of 49,000 of its ordinary stock. The company is handling the operations and maintenance (O&M) of the ZEC Solar PV farm under a 21-year contract.
• Once the deals are finalised, ZEC Solar and TJZ Suria will become direct and indirect subsidiaries of Malakoff, respectively.
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Malakoff eyes new gas, solar plants in Tanjung Bin for energy exports:

• Independent power producer (IPP) Malakoff Corp Bhd is exploring combined-cycle gas turbine (CCGT) and solar photovoltaic (PV) plants in its Tanjung Bin site in Johor, to cater for electricity exports.
• The group, which has 21% of generation capacity in Peninsular Malaysia, is “actively pursuing” a new CCGT project.
• ​Malakoff has seen generation capacity declining in recent years following the expiry of power purchase agreements (PPAs), the latest being a 21-year PPA for the 640-megawatt (MW) GB3 gas-fired plant in Lumut, Perak in 2022.
• ​Export opportunities abound led by Singapore, which is seeking to import up to 1,200MW of electricity by end-2027. Malaysia has expressed intention to participate, and lifted its renewable energy (RE) export ban to Singapore last year, although details of the mechanism have yet to be ironed out.
• ​Malakoff’s effective thermal power generation capacity stood at 5,342MW, with RE capacity of 153MW, its annual report showed.
• In Kukup, Johor, where Jalan Tanjung Bin is located, Malakoff owns 90% in the 2,100MW coal-fired Tanjung Bin power plant in Johor, the PPA of which expires in 2031. It also wholly owns the 1,000MW coal-fired Tanjung Bin Energy power plant that is contracted to operate until 2041.
• ​Aside from looking for new CCGT capacity, Malakoff will continue to invest in expanding the proportion of its biomass co-fired project with coal.
• On lookout for M&A - Aside from bidding for new RE projects, Malakoff is considering potential acquisitions in operational greenfield ventures “particularly large scale solar (LSS) projects and exploring opportunities in waste management and environmental solutions”.
• This came as it acknowledged that some potential sellers, including LSS players, are hesitant to let go of their assets despite lucrative opportunities for monetisation and current market stability.
• The group also aims to leverage its established partnerships and focus on countries it is familiar with such as Malaysia, Saudi Arabia, Bahrain and Oman.​
  
  
  

MALAKOFF FINANCIAL

• Malakoff Corp registers RM38.66m net profit in 1Q
• First quarter performance for the period ended March 31, 2024 (1Q 2024) registered a net profit of RM38.66 million, compared with a net loss of RM99.09 million ringgit in 1Q 2023.
• ​Revenue was slightly lower by 0.2 per cent to RM2.28 billion versus RM2.29 billion in the same quarter last year, primarily due to the lower energy payment recorded from Tanjung Bin Power Sdn Bhd (TBP) and Tanjung Bin Energy Sdn Bhd (TBE) in line with the decline in applicable coal price.
• The group recorded a profit before taxation of RM119.78 million in the current quarter, an increase of RM204.22 million from a loss before taxation of RM84.44 million reported in the corresponding quarter ended March 31, 2023.
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