MALAKOF has entered into a 34-year concession agreement for a WTE facility at Melaka. The RM660m WTE plant will process up to 1,056 tpd of waste and generate c.22MW of electricity.
We view this development positively for MALAKOF as it marks the Group’s maiden venture into the WTE space, introducing an additional stream of recurring income.
Assuming a capacity factor of 70%, 800 tpd of waste handled, and a PAT margin of 10%, this translates into estimated PATMI of RM8.4m, or c.3.1% of our FY25F earnings forecasts.
No change to our earnings forecasts at this juncture as contributions from the WTE plant are expected to begin only from FY29, which is beyond our forecast horizon.
Maintain our BUY recommendation with an unchanged TP of RM0.88 based on SOP valuation.
34-year Concession Agreement for WTE Plant. On 19 Jun 2025, MALAKOF, via its subsidiary Sungai Udang WTE Sdn Bhd, entered into a concession agreement on a Public Private Partnership basis with the Government of Malaysia for the design, construction, financing, operation, maintenance and eventual closure of a Waste-to-Energy (WTE) facility at Sungai Udang, Melaka. This represents a key milestone for the Group’s RE ambitions. Sungai Udang WTE is a special purpose vehicle incorporated for this project, with MALAKOF holding a direct 60% stake and the remaining 40% held by Alam Flora Environmental Solutions Sdn Bhd (97.37%-owned by MALAKOF). This structure gives MALAKOF an effective interest of 98.9% in the project.
Further Details. Sungai Udang WTE will be Malaysia’s second WTE facility. The first, owned and operated by CYPARK (NR), was completed in 2023 at Negeri Sembilan, with a processing capacity of 800 tonnes per day (tpd) and 15MW of energy generation. In comparison, the RM660m Sungai Udang plant will process up to 1,056 tpd of solid waste and generate c.22MW of electricity.
The concession follows a Build-Own-Operate-Demolish (BOOD) model over a 34-year period, comprising 3-year construction phase, 30-year operational period and a 1-year closure phase. COD is targeted by 2029, with construction expected to begin in 2QCY26.
Our View. We view this development positively as it marks MALAKOF’s maiden venture into the WTE space, introducing an additional stream of recurring income via waste management and RE. The project also strategically positions MALAKOF within the growing WTE segment.
The plant will derive revenue from two sources: tipping fees for waste management and electricity sale via a PPA with TENAGA (BUY, TP: RM16.04). While PPA has yet to be executed, it is expected to be signed in due course. Previous guidance indicated a tipping fee of c.RM96/tonne, a minimum incoming waste volume of 800 tpd, and a 21-year PPA at RM0.42/kWh. Assuming a capacity factor of 70%, 800 tpd of waste handled, and a PAT margin of 10%, this translates into estimated annual revenue of RM84.7m and PATMI of RM8.4m, equivalent to c.3.1% of our FY25F earnings forecasts. Assuming a 70:30 debt-to-equity financing structure, the RM660m project cost implies borrowings of c.RM462m, likely to be funded via long-term project financing.
Earnings Revision. No change to our earnings forecasts at this juncture as contributions from the WTE plant are expected to begin only from FY29, which is beyond our forecast horizon.
Valuation & Recommendation. Maintain BUY recommendation on MALAKOF with an unchanged TP of RM0.88 based on SOP valuation, and a three-star ESG rating. We have yet to incorporate the WTE plant into our valuation pending further clarity. That said, with rising domestic power demand, we believe MALAKOF is the frontrunner to secure new gas-fired plant PPAs under the Energy Commission’s recent RFP for up to 8GW capacity, given its position as Malaysia’s largest IPP and strong operational track record in managing gas-fired plants across Peninsular Malaysia.
Risks. Rapid plunge in coal prices, unplanned plant shutdowns, non-renewal of concession.
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