MALAKOF’s 1QFY25 core net profit (CNP) of RM52.0m fell short of expectations due to lower-than-expected contribution from Prai Power Plant as a result of lower capacity income, as well as higher-than-expected operating expenses.
1QFY25 CNP plunged 22.1% yoy, impacted by lower contribution from PPP due to reduced capacity income following the PPA extension, and by a RM3.8m increase in perpetual sukuk distribution following 1%-pt increase in the profit rate.
Medium-term earnings growth will be supported by new gas plant PPAs, and tariff adjustments for the concession solid waste management business.
After factoring in a lower capacity income for PPP and higher operating expenses, we trim our FY25/FY26/FY27 earnings forecasts by 10.3%/16.3%/23.2% respectively.
Maintain our BUY recommendation, albeit with a lower TP of RM0.88 (previously RM0.94) based on Sum-of-Parts (SOP) valuation, and appraised with a three-star ESG rating.
Missed Expectations. Excluding extraordinary items such as coal provision to NRV based on the ACP (+RM45.0m), net forex loss (+RM0.4m) and including the distribution of perpetual sukuk (-RM27.4m) not shown in the P&L statement, MALAKOF’s 1QFY25 core net profit (CNP) of RM52.0m fell short of expectations, accounting for 17% of our full-year forecast and 18% of consensus estimates. The earnings miss was due to lower-than-expected contribution from Prai Power Plant (PPP) as a result of lower capacity income following the extension of the PPA, as well as higher-than-expected operating expenses.
YoY. 1QFY25 CNP plunged 22.1% yoy, impacted by lower contribution from PPP due to reduced capacity income following the PPA extension, and by a RM3.8m increase in perpetual sukuk distribution following 1%-pt increase in the profit rate. Notably, the Waste & Environment segment continued to demonstrate stellar performance, with segmental PAT growing 3.1% yoy, likely driven by additional contribution from the acquisition of a 49% stake in E-Idaman completed on 28 Feb 2025.
QoQ. CNP surged 24.4% qoq, supported by better fuel margins (1QFY25: RM0m vs 4QFY24: -RM18m) and the absence of provision for Tanjung Bin Energy’s (TBE) availability target penalty (ATP) incurred during an outage in 4QFY24.
Outlook. Looking ahead, we expect MALAKOF to face less negative fuel margins in 2QFY25 as coal prices have stabilised since April 2025. Management disclosed that the available capacity under the recently opened gas-fired plant tender by Suruhanjaya Tenaga amounts to 8GW, with the majority required between 2026 to 2027. The Group will submit PPP, Segari and GB3 for the tender, likely under the Category 1 (extension of PPAs/expansion of existing generation capacity), and we believe they will also submit a bid for Category 2 (new generation capacity). Medium-term earnings growth will be supported by (i) new gas plant PPAs driven by the demand for newer, more efficient power plants to replace expiring assets, and (ii) tariff adjustments for the concession solid waste management business.
Earnings Revision. After factoring in a lower capacity income for PPP and higher operating expenses, we trim our FY25/FY26/FY27 earnings forecasts by 10.3%/16.3%/23.2% respectively.
Valuation & Recommendation. We maintain our BUY recommendation, albeit with a lower TP of RM0.88 (previously RM0.94) based on Sum-of-Parts (SOP) valuation. No ESG premium or discount has been applied, given the company’s three-star ESG rating. With rising power demand in Malaysia, we believe MALAKOF is the frontrunner to secure new gas plant PPAs, given its position as the largest IPP in Malaysia.
Risks. Rapid plunge in coal prices, unplanned plant shutdowns, non-renewal of concession.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.212042 | 4.248408 |
| EUR | 4.921000 | 4.929487 |
| CNY | 0.591903 | 0.592919 |
| HKD | 0.540309 | 0.544492 |
| SGD | 3.268153 | 3.293573 |