KUALA LUMPUR (Feb 24): Analysts have lowered their earnings forecasts for Malakoff Corporation Bhd (KL:MALAKOF), after its results for the fourth quarter ended Dec 31, 2024 (4QFY2024) fell short of expectations.

RHB Investment Research has cut its FY2025-26 earnings forecast by 12%-7%, after imputing a higher cost base and lower plant stability.

"As such, our DCF-based TP is lowered to RM1.02 accordingly, with an unchanged 10% ESG discount," said the house in a note on Monday, referring to its discounted cash flow-based target price.

It said this after Malakoff's FY2024 core earnings came in below expectations, largely due to higher negative fuel margins, indicating that fuel costs for electricity generation exceeded the revenue from its sale, and unplanned plant outages for the Tanjung Bin Energy plant in 4QFY2024.

Nonetheless, the house said that despite the unexpected plant outages, Malakoff still managed to turn around, driven by improved contributions from the Tanjung Bin Power and Tanjung Bin Energy plants, coupled with stronger Alam Flora contributions.

Looking ahead, Malakoff’s prospects are bolstered by plans for capacity expansion, signalling sustained growth ahead as it looks to capitalise on rising energy demand, said analysts.

Apex Securities, on the other hand, lowered its earnings forecasts by 0.6% for FY2025, and 0.5% for FY2026. It also introduce its FY2027 earnings forecast of RM397.8 million.

Even so, Apex maintained its 'buy' call with a target price of 96 sen, citing Malakoff’s potential to secure new gas plant power purchase agreements.

TA Securities, with a 'buy' call, highlighted the company’s discussions with regulators for up to 2.8GW of new combined cycle gas turbine capacity. The group is also exploring the re-commissioning of its 640MW GB3 plant in Manjung, which had ceased operation in 2022. 

"We reckon valuations could re-rate higher given a tightening electricity market condition and improving prospects for new capacity,” said analysts at TA. 

Shares of Malakoff closed two sen or 2.4% higher at 84.5 sen on Monday, valuing the company at approximately RM4.23 billion.

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