Investment Highlights

Malakoff swung from a net loss of RM490mil in 9MFY23 to a core net profit of RM229.2mil in 9MFY24 on the back of fuel margin gains. Although the group faces earnings risk from the expiry of PPAs, dividend yield is decent at more than 6%. Hence, we maintain HOLD with a new target price of RM0.88/share (vs. RM0.85/share previously). Our target price of RM0.88/share is based on a FY26F PE of 14x, which is the group's five-year average.

• Malakoff's 9MFY24 core results (ex-disposal gain of RM13.5mil) were 14% above our forecast but within consensus. The group exceeded our expectations due to a lower-than-expected interest expense. We have raised Malakoff's FY24E net profit by 8.1% to account for this.
• Fuel margin gains boosted net profit in 9MFY24. Malakoff swung to a core net profit of RM229.2mil in 9MFY24 from a net loss of RM480mil in 9MFY23 underpinned by fuel margin gains of more than RM400mil. Recall that Malakoff recorded fuel margin losses of RM564mil in FY23 as coal prices dived.
• TBP and TBE power plants are main earnings drivers. The two power plants are estimated to account for more than 80% of Malakoff's capacity payments. We believe that there were no forced outages in 9MFY24. We estimate TBP's EAF (equivalent availability factor) to be 80% and TBE's EAF to be more than 90% in 9MFY24.
• Alam Flora is steady. Alam Flora's net profit rose by 11.7% YoY to RM91mil in 9MFY24 supported by a higher volume of waste managed and lower operating costs. Net profit margin edged up to 13.8% in 9MFY24 from 12.3% in 9MFY23. We believe that Alam Flora accounts for 20% to 25% of Malakoff's EBIT.

Source: AmInvest Research - 27 Nov 2024