PETALING JAYA: Malakoff Corp Bhd
has acquired the remaining 51% stake in ZEC Solar Sdn Bhd and the remaining 49% stake in TJZ Suria Sdn Bhd from Zelleco Engineering Sdn Bhd.
This development is mildly positive, according to TA Research, as it increases Malakoff’s effective renewable energy (RE) capacity to about 128 megawatt (MW) from 113MW previously.
This will contribute to the group’s target of achieving 1400MW RE capacity by 2031, the research firm added.
"In terms of earnings, we expect a mild +0.6% impact from the incremental stake, assuming ZEC Solar’s project was constructed at a capital expenditure (capex) of RM4.5-5.0mil per megawatt alternating current and is able to achieve a project internal rate of return (IRR) of mid-to-high single digit.
"We also take into consideration the fact that lowest and mean tariff bids during the first Large Scale Solar (LSS1) programme were as high as 39sen and 45sen per kilowatt-hour," TA Research said in a report yesterday.
According to the research firm, the acquisitions should have little impact to the group’s balance sheet considering the group’s RM1.8bil gross cash position as at end of the third quarter of financial year 2024 (FY24).
Malakoff forked out RM27mil for the acquisitions.
ZEC Solar is the owner and developer of an large solar scale photovoltaic (LSSPV) facility with a capacity of 29MW, located in Kota Tinggi, Johor under the LSS program with a 21-year solar power purchase agreement effective until 2040. TJZ Suria, meanwhile, operates and maintains the LSSPV Facility under a 21-year operation and maintenance contract with ZEC Solar.
"We tweak FY25/26 net profit higher by +0.6%/+0.6% to factor in the impact of the incremental stake in ZEC Solar and TJZ Suria.
"Our target price is also tweaked slightly higher to RM1.06 per share from RM1.05 previously."
TA maintains its Buy call on Malakoff given the improved prospects of capacity replenishment on the back of tightening demand supply in the generation market.
As a yardstick, it estimates that every 1 gigawatt of new combined-cycle gas turbine capacity secured could enhance valuations by about 20sen per share, assuming 6%-7% project IRR and a 21-year power purchase agreement (PPA) tenure.
"From a valuation standpoint, Malakoff is currently trading at 4.9 times FY26 enterprise value to earnings before interest, taxes, depreciation and amortisation, which is at a discount to historical mean of 5.2 times. Dividend yield remains attractive at 5.2%-6.3% throughout our forecast horizon.
Shares of Malakoff were trading at 86 sen at the time of writing.
