UOB Kay Hian: Malakoff's Q1 17 net profit projected at RM100mil-RM120mil

Despite the weak earnings, CIMB Research maintained its Hold call on Malakoff.

PETALING JAYA: Malakoff Corp Bhd  is expected to announce stronger earnings for the first quarter of this year ( Q1 17) partly due to no major operational concern arising from its Tanjung Bin Energy (TBE) unit and better associate performance. 

UOB Kay Hian, which is maintaining a hold stance on the stock with a target price of RM1.33, said on Tuesday is forecasting Q1 17 net profit of between RM100mil and RM120mil. 

“The potentially stronger Q1 17 earnings trajectory (+20% year-on-year (y-o-y, +11% quarter-on-quarter (q-o-q) reflects local power plant assets operating within the power purchase agreement (PPA) parameters, no major operational ‘hiccups’ from TBE – which was a major concern in December 2016 due to high unplanned outage, and  better associate performance,’’ it said. 

Malakoff is expected to announce its Q1 17 earnings by the middle of this month. 

For the financial year ended Dec 31, 2016  (FY 16),  Malakoff’s net profit stood at RM355.5mil compared with RM452.4mil a year ago, while revenue was at RM6.1bil compared with RM5.3bil in FY 15

Tanjung Bin Energy entered into commercial operation in March last year. According tot he research house, TBE underwent scheduled rectification works in March 17 (for 46 days), adding that works were carried out promptly and it gathered that TBE did not experience any major operational hiccups within the quarter (Q1 17). 

Consequently, TBE continued to receive capacity payment from TNB in the quarter, it said, nothing that this news helped to dispel concerns arising from Q4 16’s sudden spike in unplanned outage.

Recall that Malakoff undertook a major kitchen sinking exercise in 2016. Specifically, a RM55.4mil operational loss was recognised in 2016 for the group’s 35.7% associate, Almiyah Attilemcania SPA (Algeria) seawater desalination plant. 

Apart from unplanned outages, the Algerian plant underwent design rectification work (which included a change of plant filter system) to ‘accomodate’ the mud density surrounding the plant.

Stepping into 2017, the brokerage Malakoff to record RM100mil-120mil in associate earnings (2016: RM19mil) on the back of absence of the Kapar Energy Venture unplanned outage, and Shuaibah and HIDD Power RM45mil-50mil net profit run rates respectively, it added.