PETALING JAYA: KJTS Group Bhd
’s plan to buy Malakoff Corp Bhd’s unit is seen as a positive move, allowing the company to expand its cooling energy management services (CEMS) business in Malaysia in a major way.
KJTS announced on Feb 3 its proposal to acquire a 100% stake in Malakoff Utilities Sdn Bhd (MUSB) for RM65.5mil.
MUSB is the exclusive provider of electricity within KL Sentral, with a capacity of up to 153MW.
It also owns and operates a district cooling plant (DCP) that supplies chilled water for the air conditioning needs of 10 buildings, including Plaza Sentral Blocks 1, 2, 3 and 4, NU Sentral Mall, Menara Shell, Ascott Sentral, Aloft Hotel, and NU Tower 1 and 2.
KJTS intends to complete this acquisition by the second quarter of this year.
“MUSB is an attractive acquisition given its exclusive licence from Malaysia’s Energy Commission to distribute up to 153MW of electricity within KL Sentral (serving a clientele base of over 3,500 accounts),” CIMB Securities Research said.
It added that the synergistic nature of KJTS and MUSB’s operations could lead to greater economies of scale.
“We believe that KJTS can leverage its expertise and track record in the CEMS business to reap low-hanging fruits, especially by improving the efficiency and profitability of MUSB’s DCP operations,” the research house said.
It projected that the acquisition will raise the company’s financial year 2025 (FY25) and FY26 net profits by 18.2% (RM5mil) and 33.5% (RM10.2mil), respectively.
These projections were based on the current electricity tariff and did not factor in any potential hikes.
CIMB Securities Research pointed out that this acquisition is valued at 6.4 times FY26 price-to-earnings (PE) ratio, a stark contrast to MUSB’s 63.5 times PE based on its FY23 net profit.
MUSB’s total net profit margin stood at 0.6% in FY23, compared with 6.8% for KJTS in the same period.
The research house reiterated its “buy” call and raised its target price to RM1.30 per share from 98 sen.
KJTS intends to fund this acquisition via cash, using part of its listing proceeds of RM44.4mil, and bank borrowings.
“Post funding this acquisition, we estimate KJTS will have a minimal net gearing of 0.01 times from a net cash position of RM63.9mil as at the end of the third quarter of 2024,” CIMB Securities Research said.
KJTS shares closed 4.26% higher yesterday at 98 sen.
