Lower 1Q22 earnings on TBE outage
? 1QFY22 core net profit was below expectations due to lower-than-expected
contribution from TBE and higher-than-expected costs.
? Reiterate Add, with a revised SOP-based TP of RM0.98 post-earnings
revision and risk-free rate adjustment. Dividend yields decent at >6%.
Key results highlights
Malakoff’s 1QFY22 results came in below expectations, at 17% of our and 19% of
Bloomberg consensus’ full-year forecasts, due to higher-than-expected costs and lowerthan-expected contribution from Tanjung Bin Energy (TBE), which was impacted by plant
outages (low-pressure turbine blade failure from 3 Nov 21-14 Feb 22). 1QFY22 core net
profit (excluding forex and impairment loss) declined 14% yoy despite stronger revenue
(+39% yoy), dragged by lower contribution from the TBE plant due to the unplanned
outage, higher operation and maintenance (O&M) costs, and higher tax expense (+25%
yoy). These more than offset the stronger contribution from associates/joint ventures
(+72% yoy) and Alam Flora (1Q22 PATMI at RM27m vs. 1Q21’s RM17.9m, +51% yoy
due to increase in service frequency and additional income from post-flooding works).
Core earnings weaker qoq
Qoq, 1Q22 core earnings declined 25% mainly due to lower contribution from Tanjung
Bin Power (TBP) on higher weighted average fuel costs, and weaker contribution from
Alam Flora (-28% qoq) on seasonality. We cut our FY22-24F EPS estimates by 3-13% to
reflect the lower contribution from TBE’s outage and higher operating costs. We expect
Malakoff’s FY23-24F core net profit to grow on: i) steady performance from its power
plants due to expected lower unplanned outages, ii) strong profit from Alam Flora due to
business expansion and potential revision of tariffs, and iii) lower finance cost due to a
lower gearing level. However, we project weaker FY22F core earnings to reflect the
impact of the one-off Cukai Makmur.
Dividend outlook
Malakoff announced an FY21 final DPS of 2 sen in Mar 22 (vs. 2.3 sen in Mar 21),
bringing its total FY21 DPS to 5.1 sen (flat yoy; c.98% dividend payout based on FY21’s
reported earnings), which is above our FY21 DPS forecast of 4.4 sen on higher-thanexpected dividend payout. The group has been paying out an average of >90% of its
earnings as dividends since 2013, with c.100% dividend payouts for 2017-19 and c.87%
for FY20. The group is still committed to maintaining its dividend policy of paying out a
minimum 70% of its net profit to shareholders.
Reiterate Add
Our SOP-based target price is revised to RM0.98 post-earnings revisions and factoring in
the higher risk-free rate to 4.5% (vs. 3.5% previously). We like Malakoff given its
improving earnings profile, potential beneficiary of strong growth in national renewable
energy capacity, and its decent dividend yield of >6% for FY22-24F.