$MALAKOF / 5264 (MALAKOFF CORPORATION BERHAD)
Research by Public
Neutral – TP RM0.85

"Extension Of Thermal Plant’s PPA”

Malakoff posted third consecutive profit of RM93.6m in 2QFY24 from core net loss of RM318.7m in 2QFY23 due to the stable coal price, which provided positive fuel margin for its coal power plants. On QoQ basis, Malakoff recorded 50.4% increase in core net profit on lower weighted average coal costs for its Tanjung Bin Power Plant (TBP) and RM13m one-off gain from compensation for compulsory land acquisition. Overall, Malakoff’s 1HFY24 core net profit of RM155.8m exceeded our and consensus full year estimates at 63% and 58% respectively. The deviation from our numbers was mainly due to lower financing cost. Malakoff’s Prai Power Plant 350MW power purchase agreement (PPA) has been extended for another year until August 2025, a validation that thermal energy remains an essential base load for national power generation amid the surging electricity demand. We believe the extension could be renewed in annual basis as long as no new plant will be commissioned in near term. We raise our earnings forecasts by 36%/26%/26% for FY24F/25F/26F to reflect lower financing cost and Prai PPA extension. We maintain our Neutral call and increase our DCF-based TP to RM0.85 (from RM0.80)

Analyst:
Khairul Fahmi, CFA
khairul.fahmi@publicinvestbank.com.my