KUALA LUMPUR: Malakoff Corp Bhd's turnaround in the first quarter (Q1) 2024 is expected to continue in its financial year 2024 (FY24) on the back of normalisation of fuel margin impact driven by stabilisation of coal prices.
RHB Research said Malakoff returned to the black year-on-year (YoY) with core earnings of RM62 million from a core loss of RM76 million in Q1 2023.
The firm said the turnaround was largely anchored by improved contributions from Tanjung Bin Power (TBP) and Tanjung Bin Energy (TBE) plants as a result of the lower weighted average coal costs following stabilisation of global coal prices coupled with lower finance costs.
"Malakoff's Q1 2024 results came in within expectations, accounting for 22 per cent of our and street full-year estimates.
"We expect such an earnings recovery trend to continue," it said.
According to RHB Research, Malakoff's power purchase agreement (PPA) for the 350-megawatt Prai gas power plant is expiring at the end of this year and the company is in discussion with the regulator for a potential extension.
The firm said Malakoff has also proposed to acquire a 51 per cent stake in ZEC Solar and 49 per cent stake in TJZ Suria.
"ZEC Solar owns a 29MW large scale solar facility in Kota Tinggi (contracted under 21-year PPA and operation and maintenance (O&M) contract until 2040) for RM27 million.
"This would lift its net renewable energy or renewable energy (RE) portfolio to 168 megawatts," it said.
On the other hand, RHB Research said Alam Flora continued to contribute stable earnings of RM21.8 million and total recyclable material collected increased by 18 per cent YoY in Q1 2024.
RHB Research kept its "Buy" on Malakoff with a new target price of 86 sen from 77 sen.
"Our call is largely premised on its decent dividend yield and resilient future earnings, anchored by the Alam Flora contribution and continuous plant stability," it added.