MFCB recorded 3QFY25 CNP of RM120.9m (+29.2% QoQ, -6.9% YoY), bringing 9MFY25 CNP to RM279.1m (-16.8% YoY), which accounts for 67% of our full year forecast and 64% of consensus estimates. The results were below expectations, mainly due to weaker-than-expected contributions from Resources segment amid softer demand and compressed margins.
Earnings are expected to soften sequentially in 4Q, as DSHP enters the dry season in December, leading to lower hydrology and reduced electricity generation. This will be further dampened by a scheduled turbine overhaul and weakening of USD against MYR.
We have revised FY25F/FY26F/FY27F earnings by -7.9%/-8.1%/-7.1%, reflecting lower USD/MYR assumptions and more conservative margin forecast for the Resources segment.
Post-revision, our SOP-derived TP falls to RM3.42 (from RM3.68). Maintain HOLD.
Below expectations.After adjusting for one-off items, including the net foreign exchange impact of RM0.6m (realised loss and unrealised gain), the fair value loss on the put option of RM0.7m and other minor items of RM0.04m, MFCB’s 3QFY25 core net profit came in at RM120.9m. This lifted 9MFY25 core net profit to RM279.1m, which is 67% of our forecast and 64% of consensus estimates. The result was below expectations, mainly due to a weaker-than-expected contribution from the Resources segment, where softer demand and compressed margins continued to weigh on profitability.
QoQ. CNP surged by 29.2%, driven mainly by stronger contributions from the Renewable Energy division, where segmental PBT increased 21.6%, supported by peak-season hydro generation at DSHP, which typically occurs from June to November. This lifted electricity output, as reflected in the improvement in EAF from 80.3% to 93.8%. The Packaging segment also recorded a strong profit rebound (Segmental PBT +132.8%) driven by higher sales of paper bags and films and lower raw material costs. These improvements offset weaker performance from the Resources segment (Segmental PBT -32.8%) due to lower ASPs from adverse FX and higher overheads arising from lower volume. Associate losses mainly from Edenor, narrowed to RM13.7m (from RM16.5m in 2QFY25) following the resumption of gas supply in early July 2025.
YoY. CNP declined by 6.9%, mainly due to a significantly weaker contribution from the Resources segment, where segmental PBT fell 59%. The division was impacted by softer demand, reflected in a 16.8% drop in lime product volume, lower ASPs from adverse FX movements, and higher maintenance expenses and freight charges. Associate losses widened to RM13.7m (from RM7.7m) due to weak demand, weaker USD against MYR and inventory valuation losses. These were partly offset by the Renewable Energy division, where segmental PBT rose 5.1% due to lower royalty charges following the acquisition of the water rights asset, lower amortisation arising from the concession extension, and a higher EAF which improved from 80.3% to 93.8%. The Packaging division recorded healthy volume growth YoY, but earnings remained constrained by margin pressure.
Outlook. We expect 4Q earnings to be softer sequentially, as DSHP enters the dry season in December, leading to lower hydrology and reduced electricity generation. This will be further affected by the scheduled turbine overhaul and the expected weakening of the USD against the MYR (USD/MYR softened from an average of 4.21 in Sept to ~4.16 in Nov). Packaging is expected to maintain its sales momentum, though margins will remain under pressure given elevated production costs. The Resources segment is likely to stay subdued amid soft demand and persistent cost pressures. Meanwhile, we anticipate a further narrowing of losses from associates, particularly Edenor, as plant operations stabilise following the restoration of gas supply.
Earnings revision. We have revised our earnings forecasts by -7.9%/-8.1%/-7.1% for FY25F/FY26F/FY27F. The adjustments reflect a lower in-house USD/MYR assumption of 4.20 for FY25F and 4.15 from FY26F onwards (vs. 4.30 previously). We have also trimmed our estimates for the Resources segment after incorporating more conservative margin assumptions.
Valuation & Recommendation. Post-earnings revision, we derive a new TP of RM3.42 (from RM3.68) based on SOP valuation. Maintain HOLD. Nonetheless, we continue to like MFCB for its: (i) defensive earnings profile, with close to 90% of PBT contributed by recurring income from the Renewable Energy segment, (ii) commitment to pursue value-accretive growth opportunities, and (iii) strong balance sheet and cash flow generation, underpinned by a low gearing level of 0.18x as at 3QFY25 and operating cash flow exceeding RM500m annually.
Risks. Appreciation of the MYR against the USD, increase in petcoke prices, and a slower-than-expected recovery in the Resources segment, alongside a prolonged recovery trajectory for associates.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.144070 | 4.176994 |
| EUR | 4.790696 | 4.800157 |
| CNY | 0.584163 | 0.584752 |
| HKD | 0.532153 | 0.536404 |
| SGD | 3.170633 | 3.196101 |