PETALING JAYA: Malakoff Corp Bhd’s acquisition of Alam Flora is expected to improve its earnings by 4% in financial year ending Dec 31 (FY19) based on an earnings contribution of five months, according to AmInvestment Bank.
On a full-year basis, Alam Flora would increase Malakoff’s FY20 net profit by 10% and boost Malakoff’s fair value from 85 sen per share to about 94 sen a share, AmInvestment analyst Gan Huey Ling said in a note last Friday.
According to Gan, the research house will upgrade Malakoff’s FY19 earnings forecast if the RM944.6 million acquisition of 97.4% of Alam Flora from DRB-Hicom Bhd is completed by the third quarter of 2019 (Q3FY19).
Recently, Malakoff announced that the cut-off date for the fulfilment of the conditions for the acquisition has been extended to July 31.
“We have assumed Malakoff’s gross dividend per share to be 3.5 sen for FY18 and 4 sen for FY19. These translate into decent dividend yields of 4.2% for FY18 and 4.8% for FY19. Implied net dividend payouts are 93% for FY18 and 100% for FY19,” she added.
The research house maintained its “hold” recommendation on Malakoff with an unchanged discounted cash flow-based fair value of 85 sen per share. Its fair value of 85 sen per share implies an FY19 price earnings (PE) of 21.2 times and FY20 PE of 20.7 times.
Going forward, Malakoff has scheduled 100 days of maintenance shutdowns for the Tanjung Bin Energy (TBE) power plant in FY19.
As these are scheduled outages, Gan said the group will still receive capacity payments from Tenaga Nasional Bhd in FY19.
“We gather that there has not been any unplanned outage at the power plants in 4QFY18,” she said.
However, she said TBE power plant’s earnings may still be slightly affected as the rectification works for the voltage regulator, which started in early September, was only completed at the end of October 2018.
Recall that there were unplanned outages at the TBE power plant, GB3 power plant and KEV (Kapar Energy Ventures) power plant in Q3FY18.
Gan also noted that Malakoff is negotiating with General Electric, which is the main contractor, on the compensation for the unplanned outages at the TBE power plant.
She said the compensation would not be able to make up for the loss in capacity payments. However, Malakoff is hoping to extend the warranty period for the equipment and parts and/or receive compensation to cover the cost of repair or rectification works.
Previously, Malakoff’s target was to achieve the stipulated power purchase agreement threshold unplanned outage level of 6% by February 2019.
However, due to the numerous unplanned outages in Q3FY18, the timeline has been shifted to September 2019.
KUCHING: Malakoff Corporation Bhd’s (Malakoff) acquisition of Alam Flora Sdn Bhd (Alam Flora) is said to improve the former’s net profits in financial year 2019 forecasts (FY19F) by four per cent, based on an earnings contribution of five months. The team behind AmInvestment Bank Bhd (AmInvestment Bank) said that on a full year basis, the […]
KUCHING: Syarikat Takaful Malaysia Keluarga Bhd (STMB) performed above expectations for the financial year 2018 (FY18) despite the challenging market conditions seen last year, analysts observed. MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) in a recent report, pointed out that STMB reported strong growth of 43 per cent year-on-year (y-o-y) for its first […]
KUALA LUMPUR, Jan 15 — RHB Research has maintained the “buy” call on its top pick oil and gas counter, Petronas Chemicals Group Bhd (PCG), with a new target price of RM11.23. It said PCG’s recent share weaknesses, had been largely priced in…
PETALING JAYA: Nomura Global Markets Research has downgraded Malaysian equities to “underweight” from “neutral” due to poor fundamentals and lack of major expansionary reforms.
Nomura, which downgraded Malaysia to “neutral” after the elections last year, has held a “neutral” on Malaysian equities since May 2018 based on the thesis that reforms prospects could keep the multiples elevated despite micros and macros not being very supportive.
“However, with the new government more than six months in power already, while there have been efforts to fix fiscal leakages, there has not been a significant reform push which can potentially lead to expansionary economic activity,” it said in its Asean Strategy report today.
Nomura said it was hoping for more progress in areas to improve government efficiency, reduce corruption and crony capitalism and potentially roll back or ease the government’s presence in some areas but has only seen some “easier” initiatives such as closing of several government agencies while some agencies have been put under direct parliamentary supervision.
While Budget 2019 included some long-term reform measures, labour or tax reforms or much needed reforms to ease property market bottlenecks are lacking.
Amidst a background where macro and micros continue to deteriorate, Nomura said the other major issue for Malaysia is that oil prices are no longer high (above US$70 per barrel) and have declined significantly recently, which could lead to further issues for Malaysia to plug the fiscal gap.
“Our economists believe there is a high risk of fiscal slippage and the possibility of a sovereign ratings downgrade that could trigger more capital outflows,” it said.
Nomura expects Malaysia’s 2019 gross domestic product (GDP) growth to be 4%, marking a sharper decline from 4.7% in 2018, and is below consensus forecasts of 4.6% largely due to a weak export sector. It also expects Malaysia to post a fiscal deficit of 3.9% in 2018 and 3.7% in 2019.
Nomura said Malaysia will continue to be a stock-pickers’ market and prefers select defensive banks, value plays like Gamuda Bhd, and thematic plays like Malaysia Airports Holdings Bhd and Vitrox Corp Bhd.
“We believe sustainable dividend yielding plays could be attractive, as well in an environment where local rates are expected to be cut; and the government’s fiscal constraints may lead to higher dividends from government-linked companies,” it added.
LONDON, Jan 3 — A gradual rise by the Japanese yen in recent weeks culminated in a dramatic overnight surge—firing a warning shot for world markets and the global economy in 2019. Historically, outsized yen gains in short periods, such as the…