KUCHING: Malakoff Corporation Bhd’s (Malakoff) 1Q16 results were below expectations as earnings fell short due to an RM80 million one-off maintenance charge at Segari and RM12 million in liquidated damages from delay to Tanjung Bin Energy (TBE).
“Malakoff’s 1Q16 results were below our expectations, as core net profit of RM108.2 million accounted for just 20 per cent of full-year estimates due to higher-than-expected operating costs.
“Surprisingly, no interim dividends were declared although management reiterated its dividend payout policy of at least 70 per cent of its profits,” said Affin Hwang Investment Bank Bhd’s research arm (Affin Hwang Research).
Malakoff’s 1Q16 core earnings were lower by 18.3 per cent on year despite flat revenue due to higher operating costs. There were maiden revenue contributions worth RM42 million from the 1,000MW TBE power plant that began operations since March 21, but Malakoff received less-than-full capacity payments from GB3 (600MW) and Port Dickson Power (436MW).
The company also incurred higher operating costs in 1Q16 due to a non-recurring RM80 million maintenance cost at Segari (1,303MW). In addition, Malakoff booked a one-off RM12 million in liquidated damages with regards to the slight delay at TBE.
Earnings contributions from associates were lacklustre due to technical issues at the Kapar power plant, Algeria water treatment plant and Oman water treatment plant.
“We gather from management that it is putting rectification programs in place to turnaround these assets, but it is unclear when the technical issues can be fully resolved,” it added.
“While we like Malakoff for its stable cash flows, we now expect a more modest growth profile for the group. Unless Malakoff acquires a new asset in the interim, FY18E earnings would likely decline when Segari’s PPA is extended in July 2017.”