Bursa Malaysia (KLSE) Stock Investment Portal

PETALING JAYA: All eyes will be on the price movement of Malakoff Corp Bhd’s shares, which are listed today as potentially the largest initial public offering (IPO) for 2015 in Malaysia.

Malakoff’s share price performance would also have a bearing on the decision of other companies mulling a flotation on Bursa Malaysia, noted some investment bankers.

Although it has enjoyed a successful sales process thus far, with its institutional portion being oversubscribed by 13 times, it is left to be seen how its share price would perform post listing.

Complicating matters is the fact that none of the 12 cornerstone investors of Malakoff’s IPO are subject to any moratorium on their shares.

The only moratorium imposed is on the promoters of the shares, MMC Corp Bhd and its subsidiary, Anglo-Oriental (Annuities) Sdn Bhd, who are locked in for a six-month period.

MMC’s stake in Malakoff will be reduced to 37.8% after the latter’s listing.

Another major owner of Malakoff shares, the Employees Provident Fund (EPF), which sold around 227.86 million of its Malakoff shares for the IPO, still has around 970 million shares and will be free to dispose these shares going forward.

EPF reduced its stake in Malakoff from 30% to around 19.4% post listing.

It should be noted though that Malakoff’s stabilising manager, Maybank Investment Bank will undertake any price stabilisation action if needed.

At least a couple of research houses have given Malakoff a fair value above its IPO price of RM1.80.

TA Securities and BIMB Securities have a “buy” call on Malakoff and have given a fair value of RM2.09 and RM2 target price respectively.

PublicInvest Research has derived a fair value of RM2.18 for Malakoff using a discounted cash flow (DCF) valuation.

TA Securities sees Malakoff as a defensive play. It explained that in Malaysia, independent power producers (IPPs) are assured annual payments from Tenaga Nasional Bhd that ensured capital expenditure and operating expenditure recovery as well as certain return on investments as spelt out in the respective power purchase agreements (PPAs).

“Based on the disclosure in the IPO prospectus, the group commits to pay at least 70% of its annual profit as dividends.

“We see a lack of good and predictable dividend play in the power sector space in Malaysia, of which Malakoff could fill the gap,” TA Securities said in a report recently.

BIMB Securities expects Malakoff’s earnings to grow by 39.3% and 25% for financial year ending Dec 31, 2016 (FY16) and FY17 respectively driven by Tanjung Bin 4.

“Malakoff has set out a dividend payout ratio policy of not less than 70% of its consolidated profit estimated at between 4.8 sen and 6.7 sen translating to a yield of 2.7%-3.7% for the next two years based on IPO price of RM1.80,” it added.

Meanwhile, PublicInvest noted that additional capacity payments from the upcoming Tanjung Bin 4 plant was expected to boost earnings in FY16 and FY17.

It said Malakoff had existing land of about 400 ha with an average remaining lease of 47 years throughout Peninsular Malaysia with ready access to transmission infrastructure.

The land can be used for capacity expansion or other potential projects.

“The group is currently conducting a feasibility study to build a new 1,000MW coalfired power plant at the existing Tanjung Bin site for export to Singapore and another 1,000MW coal-fired power plant in north of Peninsular Malaysia for export to Thailand,” it added.

PublicInvest also pointed out that Malakoff was currently in discussions with Petronas to participate in a 1,300MW co-generation power plant in Johor’s Refinery and Petrochemicals Integrated Development project.