PETALING JAYA: Malakoff Corp Bhd’s earnings in 2024 and 2025 are expected to rebound with some room for recovery in dividends and better cash flows, says CGS-CIMB Research.
This was despite the group’s disappointing earnings delivery this year, reporting significant losses in the nine months of 2023 mainly due to the negative fuel margin arising from the mismatch between the calculations of energy payments and fuel costs.
“Beyond 2025, there is earnings upside potential from the 84MW mini-hydro plants in Kelantan, waste-to-energy facility in Melaka, gas-fired power plants and potential new solar projects,” CGS-CIMB Research said in its note to clients yesterday.
The research house also expects the group’s cash flow generation from operations to improve, which should in turn lead to a revival of dividends.
“We forecast free cash flow (FCF), excluding distortions from working capital, to expand from RM400mil in 2023 to a more normalised average run rate of RM1.3bil in 2024 and 2025.
“As such, we see the prospect of higher dividends over the next two years from a cut in 2023,” it added.
CGS-CIMB Research said value has emerged for Malakoff following a recent correction in its share price, with the stock potentially offering net yields of over 7%. “At current levels, we think the market is overlooking the group’s strong FCF generation as earnings normalise on the back of more stable coal prices,” said the research house.
CGS-CIMB Research also projects FCF yields of about 18% for 2024 and 2025.