Malakoff's shares performance was lukewarm on the first day of its relisting on Bursa Malaysia last Friday due to heavy selling pressure, which is contrary to our expectation. Management issued a press statement last Friday evening denying that the Group was keen in acquiring power assets of Edra Global Energy. We believe the knee jerk reaction is temporary and continue to like Malakoff based on its IPP business model which provides the Group with consistent and sustainable revenue streams of income throughout the PPA concession period with fuel cost-pass through features. We therefore reiterate our Outperform call on Malakoff with a TP of RM2.18. The current weakness in Malakoff's share price provides an opportunity for investors to accumulate.

Earnings growth from Tanjung Bin Energy (TBE). We expect earnings growth will come from its upcoming 1,000MW coal-fired TBE Power Plant, which is scheduled to commence operations on 1 March 2016. Despite the earlier hiccups in the construction progress, the issues have since been resolved. In addition to the CEO's assurance during the IPO Analysts' briefing in April 2015, our recent check with management confirmed that TBE's progress is on track to commence operations as scheduled. We estimate revenue from TBE to boost the Group's earnings by 46.6% and 29.0% in FY16 and FY17 respectively.

High dividend yield for power player. Arising from the expectation of higher earnings in FY16 and FY17, dividend yields are correspondingly anticipated to be higher, premised on the Group's dividend policy of a minimum 70% of PATAMI payout ratio. We estimate dividend yield to be 4.6% and 5.9% for FY16 and FY17 respectively.

Potential PPA extension for PD Power. According to news reports, the Energy Commission is considering to extend the concessions of some existing power plants which are expiring in the next few years due to potential start-up delays of awarded power plant projects. We opine the Group's PD Power stands a good chance to be considered for PPA extension. On top of the plant's good condition, its close proximity to the central region would be an added benefit for consideration of the extension.

Waste to energy project. The Group is also believed to be frontrunner in a waste-to-energy project for Kuala Lumpur at 1,000 tonnes per day and 25MW capacity. Though contribution to the bottom line from this project is expected to be relatively small, it would nevertheless provide an advantage to the Group to further explore other waste-to-energy project opportunities and expand its renewable energy portfolio, domestically and internationally.

Expecting stronger 1QFY15. We anticipate the Group will announce a stronger 1QFY15 results compared to the previous corresponding quarter as the recovery programme for its Tanjung Bin Power Plant was completed in March 2014.

Reiterate Outperform with a TP of RM2.18. We continue to like Malakoff based on its IPP business model and therefore reiterate our Outperform call on Malakoff with a TP of RM2.18.

Source: PublicInvest Research - 18 May 2015