, Malaysia

Malakoff finally shook off consecutive quarters of dismal profit

The MYR90m (US$20.2m) profit was a 16% drop yoy.

Following three consecutive quarters of earnings misses, 4Q16 was finally devoid of significant negatives.

A meaningful share price recovery, according to Maybank IB Research, would only materialise when doubts over dividend sustainability clear, and the pace of new project delivery quickens.

Here's more from Maybank:

Malakoff’s 4Q16 net profit of MYR90m (-16% YoY, +75% QoQ) brings FY16 net profit to MYR355m (-22% YoY), representing 95%/89% of ours/consensus full-year forecasts respectively. Recall the depreciation run-rate is now higher following the lowering of the gas plants’ residual values in 3Q16.

A 3.5sen DPS was declared, bringing FY16 DPS to 7sen (representing 98% payout ratio), again in line with our expectations.

With the PPA yet to be signed (Mar 2017), management did not divulge much information on the new 50MW large-scale solar plant.

When signed, this would be Malakoff’s first new project since its 2015 listing. Meanwhile, Malakoff’s earnings will experience a step-down beginning 2017 as the less lucrative Segari PPA extension takes effect (in Jul 2017).

This would inevitably introduce doubts over the sustainability of a 7sen DPS in FY17 (as we estimate it would require a payout ratio in excess of 100%). Management alluded to maintaining absolute dividends in FY17.

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