MALAKOF is acquiring the remaining 51% stake in ZEC Solar Sdn Bhd and the remaining 49% stake in TJZ Suria Sdn Bhd from Zelleco Engineering Sdn Bhd for a total cash of RM27mn. Following the acquisitions, both firms will be direct or indirect wholly owned subsidiaries of MALAKOF. We do not expect material impact on MALAKOF’s earnings from the acquisitions. Nonetheless, we are mildly positive on the move as it would increase MALAKOF’s effective RE capacity from 113MW to c.128MW. No change to earnings forecasts. Following the recent surge in share price, due to limited upside potential, we downgrade MALAKOF to Hold with an unchanged TP of RM0.75/share based on SOP valuation.

Acquiring RE Companies for RM27mn

Malakoff Corporation Bhd (MALAKOF) is acquiring the remaining 51% stake in ZEC Solar Sdn Bhd and the remaining 49% stake in TJZ Suria Sdn Bhd from Zelleco Engineering Sdn Bhd for a total cash of RM27mn. Following the acquisitions, both firms will be direct or indirect wholly owned subsidiaries of MALAKOF.

ZEC Solar is the owner and developer of the LSSPV facility with a capacity of 29 MWac, located in Kota Tinggi, Johor under the Large-Scale Solar (LSS) program with a 21-year Solar Power Purchase Agreement effective until 2040. TJZ Suria currently operates and maintains the LSSPV Facility under a 21-year Operation and Maintenance (O&M) contract with ZEC Solar.

Our View

No financial details were given regarding the acquisitions. We do not expect material impact on MALAKOF’s earnings from the acquisitions. Nonetheless, we are mildly positive on the move as it would increase MALAKOF’s effective RE capacity from 113MW to c.128MW. This would help the group in its bid to reach 1,400 MW RE capacity by 2031.

We expect the acquisition to be fully funded by internal cash of MALAKOF as the acquisition cost is merely 1.1% of the group’s total cash at the end of FY23.

Impact

No Change to Earnings Forecasts.

Valuation

Following the recent surge in share price, due to limited upside potential, we downgrade MALAKOF to Hold with unchanged TP of RM0.75/share based on SOP valuation.

Source: TA Research - 24 May 2024