Malakoff’s 1H18 net profit below expectations

KUCHING: Malakoff Corporation Bhd’s ( Malakoff) first half of 2018 (1H18) net profit has come in below expectations on the back of higher taxes.

In a filing on Bursa Malaysia, Malakoff revealed that the group recorded profit before taxation of RM237.3 million, a 27.6 per cent decrease from RM327.7 million reported in corresponding period of the preceding year.

Malakoff’s 1H18 net profit of RM105.5 million came in below the research arm of Kenanga Investment Bank Bhd’s ( Kenanga Research) expectations, accounting for only 43 per cent and 39 per cent of its and consensus full-year forecasts, respectively, due to higher thanexpected tax expenses.

“In fact, at the profit before tax ( PBT)-level, 1H18 results were actually in-line, making up 53 per cent- 51 per cent of ours- consensus full-year forecasts,” Kenanga Research said.

“Based on our understanding, the higher-than- expected taxes were due to non- deductible expenses in relation to some conversion of loan stocks to preference shares, thus resulting in the higher effective tax rate of 44.8 per cent in 1H18, versus 29.1 per cent in 1H17.”

The group’s 1H financial year 2018 (1HFY18) profit after tax and minority interest ( PATAMI) also came in below Affin Hwang Investment Bank Bhd’s (Affin Hwang) expectations – delivering only 36 per cent and 39 per cent of both the research firm’s and consensus forecasts respectively.

Meanwhile, the announced dividend of 2.1 sen per share (implying 100 per cent pay- out) was also below Kenanga Research’s expectation, versus 1H17 of 2.5 sen and the research arm’s previous FY18 forecast of 4.9 sen per share.

On the disposal by Malakoff’s wholly- owned subsidiary Tuah Utama Sdn Bhd of 20 per cent equity interest in Lekir Bulk Terminal Sdn Bhd to Tenaga Nasional Bhd, Kenanga Research noted that while this is expected to have a minimal impact towards Malakoff’s net-gearing of 1.9 to 1.5-fold for FY18 to FY19E, the move is seen as unlocking some value from the group’s non- core business.

“Meanwhile, after rectifying boiler-related issues which plagued Tanjung Bin Energy in the fourth quarter of 2017 (4Q17) to 1Q18, we were guided that the plant should not be facing any further outages for the remainder of the year.

“We also remain cautiously optimistic on Malakoff’s acquisition of Alam Flora pending further announcements,” Kenanga Research said.

Affin Hwang noted that assuming Malakoff maintains the group’s current dividend policy, there is the possibility of the distribution of the gains as dividends of 0.8 to one sen per share to shareholders in 4Q18.