Malakoff lacks growth catalysts – Analysts
KUALA LUMPUR: Analysts have downgraded their earnings forecast on Malakoff Corporation Bhd (Malakoff), given its lack of growth catalysts moving forward.
In a report, the research arm of BIMB Securities Sdn Bhd (BIMB Securities) believed that there is a lack of catalysts for Malakoff moving forward.
“We expect earnings to be suppressed by higher interest expense from Tanjung Bin Energy (TBE).
“Near term, we do not foresee additional new power plant for Malakoff in the pipeline. Management is looking to expand its energy portfolio in the domestic renewable energy in line with the government target of increasing renewable energy installed capacity to 2,080MW by 2020.
“With the experience and capability in the team, we believed Malakoff will have a fair chance to bag some of the renewable energy project,” it opined.
It noted that TBE achieved its commercial operation date on March 21, 2016. The 1,000MW ultra-supercritical coal-fired power plant has a 25-year PPA with TNB.
“Since commissioning, TBE has recorded satisfactory thermal efficiency. Thermal efficiency measure of the efficiency of a generator or power plant converts a fuel into heat and into electricity. In the second quarter (2Q), TBE recorded 36 per cent thermal efficiency equivalent to TBP,” it added.
The research team said that while TBE has made its first full quarter contribution in 2Q16 with RM179.8 million capacity payment and RM149.8 million energy payment, the contribution was below expectations.
It explained, the contribution from TBE has been below expectation arising from outages occurred in May and June. The outages forced the equivalent availability level to stand at 50 per cent in June.
Aside from that, BIMB Securities noted that Malakoff results were lower last year due to compression rotor rectification work in the Prai power plant.
“In 2Q16, Malakoff has successfully made an insurance claim on rotor replacement amounting to RM54 million. However, the insurance claim will contribute as a one-off amount to FY16 net profit,” it added.
Overall, BIMB Securities downgraded its call on Malakoff to ‘hold’.