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Singapore Investment


  MALAKOF 5264 MALAKOFF CORPORATION BERHAD wraps FY22 with decent dividend yield boosted by higher 4QFY22 net profit

Malakoff Corp Bhd’s final dividend of 2.45 sen per share for FY2022 should provide some cheer to yield investors.

This is after the power producer displayed powerful results in its 4QFY22 with its net profit more than doubled year-on-year.

The company reported a net profit of RM41.9 million for 4QFY2022, compared with RM15.1 million a year ago mainly due to higher energy payment from its Tanjung Bin power plant on the back of higher applicable coal price.

Its quarterly revenue jumped 53% to RM2.97 billion from RM1.9 billion a year ago.

For the full year, net profit rose 20% to RM255 million from RM213.2 million in the previous year on the back of 60% rise in revenue to RM10.4 billion from RM6.5 billion.

The final dividend will be paid on May 26, bringing Malakoff’s total dividend payment for the year to 5.25 sen per share, compared with 5.10 sen for FY2021.

Long time investors in Malakoff have been disappointed with the company’s dismal share price performance as it is still trading below its IPO price of RM1.80, making its debut in 2015.

Can’t blame them as Malakoff is now trading at less than half of its IPO at 68 sen.

At the current level, it represents some 10.5% increase over the past 6 months.

The counter hit a 52-week low of 58 sen in June last year before touching a year high of 74 sen last month.

The creeping optimism stems largely from its ability to pay decent yields.

Analysts expect Malakoff to be able to sustain its dividend payments. Its dividend payouts have exceeded 80% every year since FY16.

AmInvest Research forecasts a gross DPS of 5 sen for FY23, which implies a decent yield of 7.3%.

What makes the counter attractive is its low valuations of a FY23 PE of 9x, which is below its 2-year average of 14x.

AmInvest maintains a buy call on Malakoff but with a lower DCF-based fair value of 81sen per share from 87 sen previously, with a WACC of 7.5%.

The lower FV was largely due to a reduction in Malakoff’s FY23 net profit by 8% dragged by a weaker fuel margin resulting from the fall in coal and gas costs.

To make matters worse, Malakoff’s core net profit is expected to drop in FY23 due to the expiry of GB3’s power purchase agreement in December 2022.

The GB3 gas power plant (640MW) accounted for 11% of Malakoff’s capacity payments in FY22.

On its other businesses, Malakoff is expected to secure more solar rooftop projects this year although the earnings contribution is unlikely to be significant as the size of the projects is small.

Meanwhile, Kenanga Research believes Malakoff should see improved earnings stability having completed the low-pressure turbine blade failure repair works in Feb 2022 at its 1,000MW coal-fired power plant Tanjung Bin Energy.

There are plenty of reasons to like Malakoff especially if you are looking for consistently good yields but may be wary of the fluctuation in coal and gas prices.


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