Mega First Corporation Berhad - Post-results briefing takeaways
Thu, 28-Aug-2025 07:36 am
by Tan Sue Wen • Apex Research

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MFCB (3069)

Target Price (RM)

3.68

Recommendation

Hold

  • Earnings are expected to improve in 2H25, driven by DSHP running at full capacity following scheduled overhauls and higher energy sales on improved EAFs. Installed solar RE capacity is projected to rise from 32.1MWp to 94.5MWp by end-2025 upon completion of the CGPP and Maldives projects. 

  • MFCB has submitted a bid for a 100MW/400MWh BESS project, partnering with a leading Chinese storage technology player. The tender closed in July 2025, with awards expected by end-2025. 

  • Oleochemical segment is expected to turn EBITDA-positive in 2H25, with utilisation at ~80% following the restoration of full gas supply and reduced customer order cancellations. 

  • Maintain HOLD with an unchanged TP of RM3.68, based on SOP valuation, and appraised with a three-star ESG rating.

 

We attended MFCB’s 2QFY25 results briefing yesterday, and the key takeaways are as follows:

 

Earnings recovery in 2H25. MFCB’s RE division, which typically contributes more than 80% of Group PBT, is poised for earnings rebound with DSHP now operating at full capacity post-overhaul and higher energy sales supported by improved EAFs on favourable river flows. Although EDM’s new take-or-pay cap of 955GWh applies to four turbines, MFCB remains confident that full output will still be taken given Cambodia’s 700MW demand obligation. Installed solar capacity is projected to rise from 32.1MWp to 94.5MWp by end-2025 with the completion of the 51.0MWp CGPP and 11.4MWp Maldives projects, lifting total RE generation capacity to ~400MW

 

Strategic entry into BESS. MFCB has submitted bids for Malaysia’s first 100MW/400MWh BESS tender (~30 participants) under the NETR, partnering with a leading Chinese storage technology player. Project IRRs are likely to be modest at mid-single digits, reflecting competitive bidding. The business model is similar to power plant PPAs, with 90% backed by fixed-capacity charges and the remaining 10% from variable service charges. While banks may only recognise the fixed component for debt coverage, hence necessitating higher equity contribution, MFCB’s strong balance sheet (net gearing c.20%) and track record in power plant operations position it competitively. The tender closed in July 2025, with awards expected by end-2025.

 

Oleochemical turnaround on the horizon. The Putra Heights oleochemical plant, which weighed on 1H25 performance, has resumed stable operations following the restoration of full gas supply. Plant utilisation has recovered to around 80% since July 2025, with reduced customer order cancellations, and management expects the segment to turn EBITDA-positive in 2H25. Nonetheless, margin upside may remain capped as Indonesian peers continue to benefit from structural cost advantages under favourable export tax policies.

 

Packaging and Resources remain pressured. Packaging utilisation has improved on efforts to diversify the customer base, but ASPs remain under pressure from Chinese dumping, while regional overcapacity continues to weigh on margins. The Resources segment likewise faces weak demand, with excess Chinese supply depressing export prices. Nevertheless, the Resources segment continues to deliver steady annual operating cash flows of RM50-60m. Conditions are expected to stabilise in 2H25, supported by new quarry capacity, although margin recovery is likely to be gradual.

 

Long-term growth from Food division. MFCB has acquired a 30% stake in Chiwadi, a Thai company specialising in coconut-based wellness products, providing vertical integration with its plantation operations. Chiwadi generated c.RM20m in sales in FY24. The Cambodian coconut plantations are expected to reach break-even by 2027, with earnings projected to improve as crop yields mature. Meanwhile, CSC, the Group’s local fruit and vegetable subsidiary, remains a small contributor with quarterly revenue of ~RM23m, though profitability is expected to strengthen over the medium term as longer-cycle crops mature.

Earnings revision. We maintain our earnings forecasts unchanged. 

 

Valuation & Recommendation. We maintain our HOLD recommendation with an unchanged TP of RM3.68, based on a SOP valuation and a three-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, reflected by a net gearing ratio of 0.22x as of 1QFY25 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.

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