Date: September 23, 2024
Broker Name: CGS International Securities

Malakoff Corporation’s Role in Meeting Malaysia’s Power Demand

Malakoff Corporation is positioned as a significant player in addressing Malaysia’s growing power demand, particularly driven by the influx of data centre (DC) foreign direct investments (FDIs) in the country. The report emphasizes the critical need to maintain and expand gas assets to cope with the rapidly rising power demand that these FDIs bring.

Opportunities in Greenfield Power Projects

The company is seen as a potential beneficiary of Malaysia’s growing power requirements, not only through its existing assets but also via potential new greenfield power projects. The report highlights that Malakoff has several power projects in the pipeline, which presents an opportunity for future growth and expansion in the energy sector.

Financial Performance and Market Position

As of September 2024, Malakoff’s market capitalization is US$1.12 billion, with its stock price at RM0.97 and a target price of RM1.30. The company’s Price-to-Earnings (P/E) ratio for 2024 is forecasted at 17.0x, expected to improve to 15.4x in 2025. The stock’s Price-to-Book Value (P/BV) is at 0.9x for both 2024 and 2025, reflecting a relatively low valuation in comparison to historical norms.

Malakoff’s dividend yield is projected to remain stable at 5.7% for 2024 and 2025, making it attractive for income-seeking investors.

Investor Sentiment and Market Valuation

Investor expectations for Malakoff are considered low, as indicated by the company’s enterprise value-to-EBITDA (EV/EBITDA) multiple, which is currently trading at one standard deviation below its 8-year mean. This suggests potential undervaluation by the market, offering room for a positive re-rating if the company can capitalize on new power projects and the rising energy demand.

Strategic Role in Renewable Energy and Gas

Malakoff is also expected to have upside potential in the renewable energy (RE) space, as Malaysia pushes for more green energy initiatives. However, the company’s existing gas assets are critical in the transition phase, ensuring reliable power supply as RE capacity continues to scale up. This positions Malakoff at a strategic juncture, benefiting from both conventional and renewable energy developments in the country.

Risks and Challenges

Despite the opportunities, there are risks associated with Malakoff’s reliance on gas assets, particularly in a landscape shifting towards renewable energy. The company must balance its traditional energy operations with the growing expectations for green energy. Moreover, any delays in the rollout of new power projects or unfavorable regulatory changes could negatively impact Malakoff’s growth prospects.

In conclusion, Malakoff Corporation is strategically placed to benefit from both rising power demand and the ongoing transition to renewable energy in Malaysia. With a solid financial footing and several growth opportunities in the pipeline, the company holds significant potential for investors looking at both conventional and green energy sectors.