KUALA LUMPUR: PublicInvest Research is maintaining its Outperform call on Malakoff with an unchanged target price of RM2.18 due to its stable independent power producer (IPP) business model.
It said on Tuesday Malakoff reported a strong 3QFY15 net profit of RM156m (up 44.3% on-year, 80.8% on-quarter) due to foreign exchange gains, lower finance costs, higher interest income and lower effective tax rate.
“Excluding net foreign exchange gain of RM25.7m, 9MFY15 core net earnings of RM130.2m exceeded expectations at 80% and 78% of our and consensus estimates respectively,” it said.
PublicInvest Research also said Malakoff’s 9MFY15 revenue of RM3.9bil (-4.5% on-year) was however within its and consensus estimates at about 70% of full year forecasts.
The group declared a second interim dividend of two sen bringing total dividend payment to five sen to-date.
Malkoff’s 3QFY15 revenue (-8.8% on-year, -0.9% on-quarter) as it was affected by the lower capacity factor recorded by its gas and coal fired power plants, decrease in distillate-firing and scheduled outages at selected power plants as part of their maintenance cycle, but mitigated by contribution from PD Power following its full acquisition in April 2014.
Prai’s availability factor was impacted by gas turbine compressor rectification works. The said plant has been back in operation since end September.
However, the 3QFY15 net profit surged to RM156mil from RM108.1m in 3QFY14 due to lower administrative expenses mainly on forex translation gain of its euro and US dollar-denominated cash balances, lower other operating expenses as there were fair value gains on hedging instruments as well as no provision for negative billings in TBP for FY15,.
Other factors were higher interest income due to higher fixed deposit interest rate and lower RULS interest recognised in KEV, cheaper finance cost arising from the redemption of Unrated Junior Sukuk Musharakah from the IPO proceeds, and lower effective tax rate of 15% from write back of tax provision pursuant to a settlement agreement in a subsidiary.
The government had recently announced short-term extensions for first generation IPPs which includes Malakoff’s PD Power. It was reported that PD Power has been given an extension of three years, from January 2016 to January 2019 with a capacity of 436MW.
“However, management clarified that the group has yet to receive official notification on this extension but is expecting to receive it by this year-end. Tariff for extended PPAs is usually much lower as the power plant has been fully depreciated with no more financing costs. Assuming 80% discount to current tariff, we estimate there will be minimal impact to our valuation if PD Power’s PPA is extended for another three years,” it saod.
PublicInvest Research said Malakoff was confident the Tanjung Bin Energy would start operations on March 1, 2016 as scheduled. As of October 2015, the progress of physical completion was 98.1% with variation from actual to the original time line further reduced to 1.5%.
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