Maybank IB reiterates buy on Malakoff, lowers target price

KUALA LUMPUR: Maybank Investment Bank Research reiterated its buy call on Malakoff Corp Bhd with a lower target price of RM1.15, from RM1.25 previously as FY17 earnings failed to meet its expectations due to a slight capacity shortfall at Tanjung Bin Energy in Q4.

It said Malakoff's 4Q17 net profit of RM44mil, was down 52% on-year, brought FY17 net profit to RM301mil, 13% lower from the previous year. This was 7% and 1% below its and consensus full-year forecasts.

A dividend per share (DPS) or 3.7 sen was declared, bringing full year DPS to 6.2 sen, or 100% dividend payout ratio (DPR). Management has committed to maintaining 100% DPR going forward.

"TBE experienced a leakage of boiler tubes in 4Q17 (the underlying cause was different to that of the 1H17 outage). Rectification works have continued into 1Q18 with the plant recently back up running. 

"Rectification costs are being borne by the equipment vendors, with the plant still under warranty. Malakoff has attempted to mitigate the capacity payment shortfall in 2018 by partly rescheduling some planned outages," said the research firm.

Maybank IB research tweaked its FY18/19 earnings forecasts marginally on housekeeping and introduced its FY20 forecasts. It raised its DPS forecasts to reflect 100% DPR from 5 sen per annum previously.