Mega First Corporation Berhad - Below expectations
Fri, 22-Aug-2025 10:10 am
by Tan Sue Wen • Apex Research

Counter

MFCB (3069)

Target Price (RM)

3.68

Recommendation

Hold

  • MFCB recorded 2QFY25 CNP of RM93.5m (+44.5% QoQ, –15.3% YoY), bringing 6MFY25 CNP to RM158.3m, which accounts for only 33% of our full-year forecast and 35% of consensus estimates. The shortfall was mainly due to weaker-than-expected contributions from the Resources and Packaging divisions, as well as extended associate losses at Edenor, which continued to weigh on Group earnings.

  • Earnings are expected to improve modestly, supported by stronger hydrology at Don Sahong Hydropower (DSHP) during the Mekong Basin’s peak rainy season. However, this seasonal uplift is likely to be partially offset by FX translation losses from the continued strengthening of the MYR against the USD.

  • We cut FY25F/FY26F/FY27F earnings by 13.1%/13.7%/12.2%, reflecting lower USD/MYR assumptions (4.30 vs. 4.35 previously), more conservative margin assumptions for Resources and Packaging, and a longer-than-expected recovery path for Edenor.

  • Post-revision, our SOP-derived TP falls to RM3.68 (from RM5.43). ESG rating maintained at three stars. Downgrade to HOLD (from BUY).

 

Below expectations. Excluding one-off items such as forex gains (-RM8.2m), fair value loss on put option (-RM0.7m) and other items (-RM0.1m), MFCB’s 2QFY25 core net profit (CNP) came in at RM93.5m, bringing 6MFY25 CNP to RM158.3m. This accounted for 33% and 35% of our and consensus full-year forecasts, respectively. The shortfall was mainly attributed to weaker-than-expected contributions from the Resources and Packaging divisions, alongside extended associate losses at Edenor which continued to weigh on overall performance. During the quarter, the Group declared a dividend of 4.75 sen/share.

 

QoQ. CNP rose 44.5% to RM93.5m, driven by stronger contributions from Renewable Energy (segmental PBT +27.1%) on the back of better hydrology, as higher water inflows at DSHP boosted electricity output. This offset weaker contribution from the Resources segment (PBT -14.4% from softer sales volume and lower ASPs for limestone products), the Packaging segment (PBT -19.7% due to higher raw material costs and an unfavourable product mix), as well as wider associate losses (+42.7%), primarily from Edenor following gas supply interruptions after the Putra Heights pipeline explosion. 

 

YoY. CNP declined 15.3% YoY, mainly due to: (i) weaker Resources segment contribution (PBT -34.3% on softer export demand and lower ASPs for lime products), (ii) softer Packaging segment contribution (PBT-61.3% impacted by higher raw material costs, unfavourable product mix and intensified competition), and (iii) wider losses at Investment Holdings & Others, primarily due to continued associate drag from Edenor (RM16.4m vs RM9.5m in 2QFY24). These were partly cushioned by Renewable Energy’s resilient performance (segmental PBT +2.4%), with margins expanding to 74.9% (vs. 70.6%) on better hydrology at DSHP, which supported higher electricity output despite softer revenue.

 

Outlook. We expect 3Q earnings to deliver a modest improvement, driven by stronger contributions from the Renewable Energy segment. DSHP is set to benefit from peak rainy-season hydrology (May-Oct) in the Mekong Basin, which should lift electricity generation and improve EAF. However, this seasonal uplift may be partially offset by FX translation losses, as the MYR continued to strengthen against the USD (USD/MYR fell from an average of 4.27 in May to ~4.24 in July). Packaging and Resources are likely to remain subdued on soft demand and elevated cost pressures, while Food Security is still in its gestation phase, with most Cambodian crops yet to reach harvest and Malaysian greenhouse operations operating near breakeven. Meanwhile, we believe Edenor will remain challenged, with earnings recovery likely to take longer as plant rectification efforts progress.

 

Earnings revision. We revised our earnings forecasts down by 13.1%/13.7%/12.2% for FY25F/FY26F/FY27F. The adjustment reflects a lower in-house USD/MYR assumption of 4.30 (from 4.35), which trims PBT by c.1.2% following the recent strengthening of the MYR. We also cut estimates for Resources and Packaging, with more conservative margin assumptions after the weaker-than-expected results. In addition, we factor in a longer-than-expected recovery path for Edenor, which is likely to keep associate contributions subdued in the near term.

 

Valuation & Recommendation. Post-earnings revision, we also lowered the PER multiples assigned to several segments to better reflect the operating environment. For Packaging, we trimmed the multiple to 5x (from 12x) given persistent demand headwinds and limited near-term visibility. For Resources, we revised the multiple to 8x (from 12x) in light of ongoing pricing pressure and weaker export demand. In addition, we applied a 20% conglomerate discount at the Group level. Following these adjustments, our SOP valuation yields a new TP of RM3.68 (from RM5.43), while we maintain a three-star ESG rating and downgrade our call to HOLD from BUY.

 

Despite the downward revision, we continue to like 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, reflected by a gearing ratio of 0.34x as of 2QFY25 and robust operating cash flow of >RM500m/annum.

 

Risks. Appreciation of MYR against USD, increase in petcoke prices, and a slower-than-anticipated recovery in the packaging segment.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
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