PETALING JAYA: Independent power producer Malakoff Corp Bhd is expected to return to the black in the first quarter of financial year 2024 (1Q24) on the back of improvement in negative fuel margins, according to TA Research.
The research house expects the group to record a core profit of RM60mil to RM70mil during the period compared with RM99.3mil in 1Q23 and RM69.8mil in , representing 22%-25% of the brokerage’s full-year forecast.
For 4Q23 ended Dec 31, Malakoff posted a net loss of RM357.12mil compared with a net profit of RM41.86mil a year ago.
Benchmark Newcastle coal prices have stabilised since June 2023, suggesting that the worst of negative fuel margins is over. In fact, Malakoff’s fuel margin turned positive in 4Q23.
“We expect the group to register mild negative fuel margins in 1Q24 as Newcastle coal prices have been 15% lower on average from November 2023 to January 2024 compared with August to October 2023,” the research house added.
TA Research said it expects Malakoff’s 97.3%-owned subsidiary Alam Flora to continue contributing stable earnings for Malakoff. Alam Flora registered profit after tax and minority interest (Patmi) of RM109.7mil in financial year 2023 (FY23) and should continue recording around RM100mil Patmi a year moving forward.
Meanwhile, the research house added that a short-term earnings boost would come from inorganic growth via the acquisition of a 49% stake in waste management company E-Idaman. E-Idaman is expected to contribute an additional 3% to 5% to the group’s bottom-line for FY24-FY26.
TA Research, which is maintaining its “buy” call on the stock with an unchanged target price of RM0.75, said, with the tensions between Iran and Israel, the company’s assets in the Middle East may be at risk if there is widening conflict in the broader Gulf region.
“Malakoff has stakes in water desalination plants in Saudi Arabia, Oman and Bahrain. These assets, forecast to contribute about RM134mil to profit in FY24 (49% of FY24 core profit), may be impacted in the unlikely event that the tension spreads to these countries,” it noted.
