Summary
MFCB recorded 4QFY24 CNP of RM116.4m (-10.4% qoq, +10.5% yoy) bringing full year FY24 CNP to RM451.9m (+17.3% yoy), which came within our and consensus estimates at 100.6% and 102.0% respectively.
Growth remains intact, supported by: (i) commencement of the fifth turbine at DSHP, expected to boost energy sales by 3%, (ii) cost savings from a four-year concession extension, (iii) reduced royalty payments offset by a one-off USD82.5m upfront payment, and (iv) a three-month tax exemption extension until Dec 2025.
Post-rolling over our valuation base year to FY26F, we maintain BUY recommendation with higher target price of RM5.36, based on a Sum-of-Parts (SOP) valuation and appraised with four-star ESG rating.
Within expectations. MFCB’s FY24 core net profit (CNP) of RM451.9m (+17.3% yoy) accounted for 100.6% of our CNP forecast of RM449.4m and 102.0% of the consensus FY25F CNP forecast of RM443.0m. A dividend of 4.5 sen/share was declared, bringing the FY24 DPS to RM0.90/share.
qoq. Excluding one-off construction revenue (RM30.8m), FV impact (RM25.3m), impairment (RM10.1m), forex movement (RM10.8m), and others (RM4.0m), CNP slipped 10.4% qoq to RM129.9m, attributed to: i) higher losses from associate Edenor, mainly due to capacity losses (-RM35.1m vs -RM7.7m in the previous quarter), ii) a drop in lime product sales due to delays in export shipments (PBT -51.4%), and iii) softened demand in the packaging division (PBT -46.2%). As a result, CNP margin dampened by 18.9-pts to 16.1%.
yoy. 4QFY24 core net profit increased 10.5% yoy, bringing the full year to RM451.9m (17.3% ytd). The stellar performance was mainly driven by: i) additional 15% effective equity interest in DSPC ii) greater hydropower output attributed to the commercial operation of the fifth turbine since July 2024 in the RE division (PBT +11.0% yoy), and iii) improved production and cost efficiencies in the resource division (PBT +6.4% yoy). Despite this, the CNP margin declined to 16.1% from 32.5% YoY, mainly due to the underperformance of associate Edenor.
Outlook. We expect earnings to remain stable in FY25, supported by (i) commencement of the fifth turbine in DSHP, which would drive 3% increase in energy sales volume, (ii) cost savings from an additional four-year concession extension (iii) reduced royalty payments offset by a one-off USD82.5m upfront payment and (iv) award a three-month tax exemption extension until 31 Dec 2025. For the resources division, anticipate continued improvement driven by efforts to enhance production cost efficiency. In addition, oleochemical business expected to turn around in 2025 as plant rectification efforts near completion. On the flipside, recovery in the packaging division remains subdued primarily attributed to oversupply issues.
Earnings revision. We have revised our FY25F and FY26F earnings upward by 27.6% and 24.1%, respectively, by adjusting our assumptions for the DSHP segment: (i) increasing the EAFs to 83% (previously 73%) applying a three-month overhaul process from four-month, as per latest guidance by management, and (ii) reducing royalty payments, which are offset by a one-off USD82m payment. We also introduce our FY27F core net profit forecast of RM384.4m.
Valuation & Recommendation. Post earnings revision, we re-iterate our BUY recommendation after raising our TP of RM5.36 (from RM5.15), based on a sum-of-parts (SOP) valuation along with an assigned four-star ESG rating. We favour MFCB for its (i) defensive earnings profile, with ~90% of PBT contributed by recurring income from the Renewable Energy segment, (ii) commitment to pursue growth to enhance shareholder value, and (iii) strong balance sheet and cash flow position, with net gearing of 0.3x as of FY24 and positive operating cash flow of above RM500m/pa.
Risk. Appreciation of MYR against USD, higher-than-expected petcoke prices, and a slower-than-anticipated recovery in the packaging segment.
Disclaimer
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Currency | Buy Rates (RM) | Sell Rates (RM) |
---|---|---|
USD | 4.451181 | 4.487974 |
EUR | 4.938764 | 4.946105 |
CNY | 0.607808 | 0.608296 |
HKD | 0.573694 | 0.577958 |
SGD | 3.324704 | 3.349527 |