Upbeat on Malakoff dividends

  • Business
  • Saturday, 25 Jan 2003


IF it is dividends you want,then take a lookat Malakoff Bhd.In mid-December 2002,Malakoff had announced a first and finaldividend of 22 sen per share for its financial year ended in August 2002. 

This was a two sen increase from the previous year,which is not surprising given the company's highly predictable earnings stream. 

At Malakoff's current price of RM4.26, this translates into a yield of 5.16 per cent. On a five-year basis, dividend growth has shot up by 82.06 per cent. The ex-date and payment date for the dividends will be on Feb 17, 2003 and Mar 7, 2003 respectively.  

An analyst from a foreign research is recommending a buy on the stock based on its attractive valuations, quality earnings growth and high dividend yield. 

His logic is quite simplistic. “If you put your money in fixed deposit, you are only getting an interest of around 3 per cent whereas if you put your money in Malakoff, you are getting almost 5 per cent,” says the analyst from the foreign research. 

Going forward too, most analysts are upbeat over Malakoff's ability to pay dividends.  

“Yes, it is the group's policy to be more generous with their dividends if it can afford it and, if it is not involved in any major acquisitions,” he continues.  

For its fourth quarter ended Aug 31, 2002, Malakoff registered a net profit of RM101.47 million compared to RM66.89 million in the same quarter of 2001. Revenue also increased to RM434.92 million from RM380.19 million.  

In November last year, Malakoff had announced that the conversion of the power plant developed by its wholly-owned subsidiary, GB3 at Segari, Perak from open cycle to combined cycle mode had been completed. 

The open cycle phase of the power plant has a generation capacity of 430mw (megawatt) . With the completion of the conversion to combined cycle mode, the generation capacity of the power plant had increased by another 210mw bringing its total generation capacity to 640mw. 

Going forward, Malakoff is projected to register an earnings growth of 23 per cent for financial year ending in 2003. This will be contributed from the upgrade of its GB3 from open cycle to combined cycle (640mw) in the first quarter of 2003. The acquisition of the Kapar plant and the 350mw Prai power plant in the same period is also expected to contribute positively to the group's earnings in the forthcoming years. 

“The new capacities (Prai plant and Kapar plant) will lead to a 185 per cent surge in Malakoff's total capacity from 1,065 mw to 2,685mw in 2004,” says the analyst from the foreign bank. 

According to GK Goh Research, the 350mw combined cycle gas plant in Prai, Pulau Pinang will begin operations by March 2003. The plant will cost RM980 million to build. Some 80 per cent or RM780 million will be financed by debt costing 8.7 per cent per annum and will be paid over 15 years. 

The plant has already signed a power purchase agreement with Tenaga Nasional Bhd to sell electricity at an average price of around 13 sen /kWh and will generate an internal rate of return of 12 per cent to 13 per cent, consistent with almost all second generation independent power producers. Prai Power is expected to contribute approximately RM25 million to RM30 million to Malakoff's earnings. 

The analyst from the foreign research has a fair value of RM5.13 while the analyst from the foreign bank fair values Malakoff at RM5.10. Multex Global Estimates forecasts a net profit of RM410.67 million with earnings per share of 47.89 sen for FY03. 

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