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PETALING JAYA: Malakoff Corp Bhd
is getting a good deal from the sale its energy-efficient cooling unit, Malakoff Utilities Sdn Bhd (MUSB), to KJTS Group Bhd, analysts say.
TA Research based this on an implied trailing 2023 price-earnings ratio of 63.5 times and price-to-book value ratio of 1.2 times, along with the potential of recognising a one-off gain from the sale depending on the latest carrying value of the asset.
The move is aimed at scaling up KJTS’ cooling operations by leveraging its expertise in energy-efficient cooling solutions to enhance Malakoff Utilities’ performance, according to the ACE Market-listed building support services provider’s filing on Monday.
“The move is expected to allow Malakoff to redeploy its capital into more profitable businesses relative to MUSB, which historically generated returns on equity of just 1.9% to 2.7% based on available financial information from 2021 to 2023,” the research house said in a report yesterday.
On Monday, Malakoff announced it had entered into a conditional sale and purchase agreement with KJ Technical Services Sdn Bhd, a wholly owned subsidiary of KJTS Group, for the disposal of MUSB for RM65.5mil.
The transaction is expected to be completed by the second quarter of this year subject to the consent of Kuala Lumpur Sentral Sdn Bhd, the Energy Transition and Water Transformation Ministry, and KJTS Group shareholders.
MUSB was established to undertake development of the electricity distribution system and district cooling system for the KL Sentral development, which encompasses a total area of 291,374 sq m.
MUSB has been the exclusive electricity distributor within KL Sentral and its surrounding developments with a capacity of up to 153MW.
It also owns and operates a district cooling system plant that supplies chilled water for the air conditioning needs of 10 buildings within the KL Sentral commercial and residential transit hub.
The buildings include Plaza Sentral Blocks 1, 2, 3, 4, NU Sentral Mall, Menara Shell, Ascott Sentral, Aloft Hotel, and NU Tower 1 and 2, according to KJTS.
KJTS chairperson Azura Azman said the acquisition will “significantly” increase KJTS’ total revenue and broaden the company’s service capabilities.
TA Research said it left its projections unchanged for Malakoff pending completion of the sale.
Even so, it foresees minimal change to the independent power producer’s earnings.
This is because the earnings contribution from MUSB could be offset by incremental interest income from the sale proceeds in the short-term.
TA Research maintained its “buy” call on Malakoff with a target price of RM1.06 a share.
This is as it forecasts improved prospects in capacity replenishment on the back of tightening demand-supply balance in the electricity-generation market.
“From a valuation standpoint, Malakoff is currently trading at 4.9 times its forecast enterprise value to earnings before interest, taxes, depreciation and amortisation for FY26, a discount to its historical average of 5.2 times.
“Its dividend yield remains attractive at 5.1% to 6.3% throughout our forecast horizon,” the research house said.
Malakoff closed at 88 sen yesterday.
