PETALING JAYA: The proposed acquisition of a 49% stake in E-Idaman Sdn Bhd by Malakoff Corp Bhd is anticipated to strengthen the latter’s position in waste management services besides being earnings accretive.
Analysts said apart from being earnings accretive, the acquisition would help Malakoff to expand its waste management services to the northern region of Peninsular Malaysia.
E-Idaman is primarily involved in collection and disposal of municipal waste under a 22-year concession granted by the government in September 2011 for the provision of waste collection and public cleaning services in Kedah and Perlis.
In 2022, E-Idaman registered a revenue and net profit of RM293mil and RM28mil, respectively, implying an acquisition multiple of 9.6 times price earnings ratio(PE), which CGS-CIMB Research said it finds reasonable for a concession-type asset with a remaining 10-year tenure.
The research house said assuming all else remains equal, profit levels hold and taking into account loss of interest income, it estimates incremental earnings of around RM9mil for Malakoff’s acquisition of the 49% from Metacorp Bhd could potentially enhance overall group 2024 forecast profit after tax by about 4%.
E-Idaman is expected to record a significant increase in revenues, according to a recent announcement to Bursa Malaysia by Malakoff. However, there were no additional details provided about this.
Malakoff in a Bursa filing on Oct 27 said it proposed to acquire 49% equity interest in solid waste management solutions provider E-Idaman for RM133.2mil.
“Apart from the earnings accretion, we view the deal positively as it further strengthens the group’s waste management and environmental solutions segment.
“Currently, Malakoff owns the concession to provide solid waste management services in Kuala Lumpur, Putrajaya and Pahang, handling about 3,200 tonnes per day,” CGS-CIMB Research added.
AmInvestment Bank Research said it was positive on the proposed acquisition as Malakoff would be able to expand its waste management services to the northern states of Malaysia. Currently, Malakoff’s subsidiary Alam Flora operates in Putrajaya, Kuala Lumpur and Pahang
“Assuming an earnings yield of 10%, E-Idaman’s net profit of RM27.2mil would imply an acquisition PE of 10 times. We believe that this is fair. In 2019, Malakoff acquired 97.4% of Alam Flora for RM869mil, which translated into a relatively similar PE of nine times,” the research house said.
