PETALING JAYA: A recent fire at Malakoff Corp Bhd
’s Tanjung Bin Energy (TBE) plant in Johor has cast a cloud over the independent power producer’s latest run of project wins, analysts say.
However, Maybank Investment Bank Research (Maybank IB Research) said it it is confident that the earnings downside has largely been priced in.
The research house said in a note to clients yesterday that the fire had overshadowed Malakoff Corp’s recent positive momentum after securing a 100MW solar farm in Bintulu, Sarawak.
It retained its “hold” call on the stock with an unchanged c-based target price of 90 sen, against a market price of 98 sen at the time of writing.
“Potential earnings downsides from the fire have been priced in, with the stock down 11% since the incident. The share price is, however, supported by expectations of further project wins and a dividend yield of 3% to 5%,” the research house said, adding that it is awaiting further clarity on the extent of the damage and outage duration caused by the fire before revising its forecasts.
The incident occurred on Oct 2 at the 1,000MW power plant’s flue gas desulphurisation system and chimney while the facility was undergoing an outage.
“The core boiler and turbine are seemingly unaffected, though investigations are ongoing,” it added.
The research house also noted that missed capacity payments, with a run rate of around RM160mil per quarter, and subsequent insurance claims remain possible scenarios. Despite the setback, Malakoff Corp has continued to build its renewable-energy portfolio.
The Sarawak solar project adds to earlier wins this year, with a 470MW solar farm in Perak and a 22MW waste-to-energy facility in Melaka, strengthening its diversification beyond coal-based power generation.
“This affirms Malakoff Corp’s positive momentum on new projects,” Maybank IB Research said, noting the potential 15 sen per share accretion from the new projects.
However, the research house also cautioned that “for meaningful value accretion, Malakoff Corp would have to work towards ensuring each project generates a decent spread over its cost of capital”.
Maybank IB Research said its earnings forecasts for Malakoff Corp remain unchanged for now, noting that its 90 sen target price is based on the sum of part with each entity in the group valued on a discounted cash flow basis and reflecting 15 sen per share of new projects.
It added that the 70% payout ratio assumption translates into dividend yields of about 3% to 5%.
Malakoff Corp owns a diversified portfolio of power and water assets. Its Tanjung Bin Power and Tanjung Bin Energy coal plants still account for more than 60% of revenue, though its management has signalled ongoing efforts to increase renewable energy and waste-to-energy capacity.
The company faces a structural challenge as its largest concession, Tanjung Bin Power, expires in 2031.
“Malakoff requires new projects to buffer against the 2031 concession expiry of Tanjung Bin Power,” the research house said.
The group’s shares have risen 8% over the past year, outperforming the FBM KLCI by the same margin, even as investors weigh short-term operational risks against longer-term diversification gains.
