Excluding one-off gain from insurance claim of RM70m, Malakoff recorded core profit of RM16.9m in 3QFY24, a reversal from core net loss of RM85.6m in 3QFY23 due to positive fuel margin following stabilisation of global coal prices. On QoQ basis, its net core profit declined significantly by -78.9% due to major plant outage in Tanjung Bin Power (TBP) for 65 days. Overall, Malakoff's 9MFY24 core net profit of RM159.2m lagged our estimates and consensus at 47.5% and 54.3% respectively. We cut our forecast by -31.9% for FY24F to reflect the significant plant outage experienced for FY24F and we maintain our FY25F/26F forecast as we expect the plant operations to be normalised upon the completion of maintenance in the period. We maintain our Neutral call with TP of RM0.85, which is based on FY25F valuation.

• Stable coal price underpins positive fuel margin. To recap in 3QFY23, Malakoff recorded core net loss of RM85.6m due to drastic downswings of coal prices approximately ~ 61% from the peak at the beginning FY23, resulting a negative fuel margin for the quarter as weightage average coal costs was higher than applicable coal price (ACP). However, the coal prices remain stable for FY24, trading at the range of USD120-150/MT, has underpinned positive fuel margin for its coal power plant, mainly TBP and Tanjung Bin Energy.
• TBP experienced plant outage for approximate of 65 days, from 28 June until 1 September 2024. We estimate that TBP to contribute about RM550-600m per quarter including both capacity income and energy income. The outage has reduced the Capacity Factor, hence receiving lower payment for the period. The impact was cushioned by higher energy payment recorded from Segari Energy Ventures (SEV), given the increase in energy despatch.
• Cash flow generation remain strong. Despite of the outages, Malakoff cash flow generation remain strong as it recorded RM376.4m operating cashflow for the quarter. We believe its ability to meet its commitments and dividend payments remain intact.
• Limited prospect. Although the extension of the Prai Power Plant highlights the importance of thermal energy as a base load, however, the government has not announced any new tenders or permanent extensions for thermal power plants. The temporary extension of aging power plants may pose operational risk as it requires thorough overhauls to ensure the reliability and efficiency. On another note, the acquisition of 49% of E-Idaman SB, a municipal waste concessionaire in Kedah and Perlis is still on-going although it has reached more than a year since it first announced in October 2023.

Source: PublicInvest Research - 27 Nov 2024