PETALING JAYA: Malakoff Corp Bhd
’s second quarter of financial year 2025 earnings were weighed down by a resurgence of negative fuel margins, which is expected to reverse in the second half of financial year 2025 (2H25) on more stable coal prices.
Malakoff is also a strong contender for new gas-fired plant contracts, said CGS International Research in a note to clients yesterday.
The re-rating catalysts for its stock are new power plants/renewable energy project wins, extension of existing power assets and earnings outperformance from sustained improvements in plant reliability.
However, the downside risks for the stock include recurring negative fuel margins, and unplanned plant outages.
The research house, which reiterated its “add” call on the stock, said Malakoff remained as its sector top pick with a target price of RM1.20 a share.
Meanwhile, Maybank Investment Bank Research (Maybank IB) retained its “hold” call on the stock but raised its target price to 90 sen from 75 sen a share to reflect 15 sen per share of new projects.
This is based on discounted cash flow, assuming RM6bil of projects at a 9% internal rate of return.
Maybank IB said with a substantial negative fuel margin already incurred in 1H25, and no obvious recovery in coal prices, it lowered its financial year 2025 (FY25), FY26 and FY27 earnings forecasts by 24%, 0.2% and 0.2% to account for the negative fuel margin at Tanjung Bin Power.
Malakoff is also on the lookout for new generation projects.
Furthermore, the research house has maintained its 70% payout assumption, which implies dividend yields of about 3% to 4%.
TA Research has tweaked the stock’s target price lower to RM1.04 from RM1.08 a share following earnings revision but it maintains a “buy” call on improving capacity replenishment prospects.
Kenanga Research said it likes Malakoff for its earnings stability underpinned by independent power plants and concessions, though improvements in risk management are needed to mitigate unnecessary volatility from issues such as unplanned outages.
On the flipside, strong electricity demand is creating opportunities for new plant developments and power purchase agreement (PPA) extensions, positioning Malakoff to benefit meaningfully.
It upgraded the stock to “outperform” from “market perform”, supported by a decent dividend yield of more than 3%, with a higher target price of RM1.05 a share.
The risks cited in its call recommendation include failure to secure new power plant projects and PPA extensions, regulatory risks, unplanned outages leading to lower capacity payment and thus affecting earnings, non-compliance with environmental, social and governance standards set by various stakeholders, and earnings volatility stemming from fuel margin gains or losses.
BIMB Research meanwhile has slashed FY25 and FY26 earnings by 33% and 18% to RM264mil and RM324mil.
It maintained a “buy” call on Malakoff with a lower target price of RM1.13 from RM1.38 a share.
