Maybank IB Research said there are near/medium-term challenges with regard to concession expiries.
PETALING JAYA: Despite its encouraging first-quarter (1Q) earnings, Malakoff Corp Bhd’s prospects remain challenging over the medium term due to risks associated with concession expiries.
The independent power producer (IPP) is currently working on securing an extension of its concession for the Prai Power station in Penang, which is expiring this month.
Further, its concession for the 2,100-megawatt (MW) Tanjung Bin Power station in Johor is due to expire in September 2031, while its Alam Flora’s concession would expire in August 2032.
Maybank Investment Bank (Maybank IB) Research stated that Malakoff’s dividend yields of less than 5% were no longer compelling, and the company’s biggest earnings contributor, Tanjung Bin Power, has only seven years of concession remaining.
“While Malakoff has returned to the black (normalisation of fuel margins), there are near/medium-term challenges with regards to concession expiries,” the brokerage explained.
It added that despite Malakoff’s presence in Johor, being one of the biggest power producers in the state, the company’s existing coal-fired power plants – Tanjung Bin Power and the 1,000MW Tanjung Bin Energy project – were unlikely to tangibly benefit from the data centre-led demand boost.
Maybank IB Research maintained its “sell” call on Malakoff, with an unchanged target price of 55 sen,
It explained that in Malaysia’s power-purchase agreement model for thermal plants, IPPs receive capacity payments based on availability, and conceptually do not benefit from increased generation. As such, it said, the data centre-led demand boost would unlikely lead to higher earnings for Malakoff’s two power plants in Johor.
Malakoff posted a net profit of RM38.7mil in 1Q24, as opposed to a net loss of RM99.1mil in 1Q23. Its 1Q24 revenue was down slightly to RM2.28bil from RM2.29bil in 1Q23.
In its filing with Bursa Malaysia, it attributed the lower revenue to lower energy payment recorded from Tanjung Bin Power Sdn Bhd and Tanjung Bin Energy Sdn Bhd, but these were moderated by higher energy payment from Segari Energy Ventures.
