New projects to drive Malakoff's growth outlook
Firstly, they see the Malakoff standing a strong chance in securing short-term extensions for its power plants, which power purchase agreements (PPAs) are expiring soon.
About a month ago, the government had invited interested companies to submit proposals for the supply of electricity for the 2025 to 2029 period under two categories, one being the extension of contracts for of existing gas-fired power plants with expiring or expired PPAs.
UOB Kay Hian Research (UOBKH Research) said it understands that Malakoff has submitted proposals to extend the operations of three of its gas-fired plants – Prai, Segari and GB3 – under this category.
The other category the government opened bids for is for the development of new gas-fired power plants.
The research house said it expects Malakoff to win a 1,400MW gas-fired power plant as the group has idle land in Port Dickson, following the retirement of the Port Dickson power plant in 2019.
'A decision by the government is expected by September or October, and we expect positive news.
'The potential award for a new gas-fired power plant is worth 22.5 sen a share or around 25% of Malakoff's market capitalisation, assuming a 9% internal rate of return for the project,' UOBKH Research said in a report.
The research house has a RM1.08 target price on the stock.
On the group's waste-to-energy (WTE) plant in Sungai Udang, Melaka, UOBKH Research expects the project to achieve financial close by mid-2026.
Construction of the facility will begin after that and will take about three years.
'The project cost is estimated at RM580mil to RM660mil. The PPA is over a period of 21 years but the waste collection concession is over 34 years. This contract win is positive for Malakoff as the group embarks on its renewable energy (RE) journey,' said UOBKH Research.
Notably, this will be Peninsular Malaysia's third WTE facility.
Another 10 to 15 WTE facilities are expected to be developed in the coming years as the country ramps up its waste management and RE infrastructure.
The research house noted that the group's wholly-owned subsidiary Alam Flora Sdn Bhd, which is one of the largest concession holders for solid waste management in the country, has a healthy concession worth RM2bil based on a run-rate net profit of RM100mil annually
'Alam Flora has been dishing out dividends during the past two years and will likely support dividends in 2025 to 2026. We understand that Alam Flora is exploring new concessions in other states within Peninsular Malaysia.'
Alam Flora currently operates in Kuala Lumpur, Putrajaya and Pahang.
Meanwhile, for the second quarter of this year (2Q25), the research firm expects a possible rebound in Malakoff's earnings as rising coal prices could lead to a reversal of previous coal inventory write-downs.
'Recall that 1Q25 net profit was adversely affected by a RM40mil provision for coal net realisation value (NRV) for the period of January to May. About 80% of the NRV came from Tanjung Bin Power Plant itself. We expect at least a normalised net profit of RM70mil per quarter in the absence of coal provisions,' UOBKH Research said.
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