Malakoff set for earnings upside
The independent power producer also plans to bid for new greenfield plants under the EC tender on top of 2.8GW of initial letters of notification already secured for two new gas-fired power plants, CGS International (CGSI) Research said in a report.
Recall that on May 10, 2025, the EC had launched a request for proposal for new gas-fired power generation capacity in Peninsular Malaysia via a competitive bidding exercise, comprising two categories.
One was for existing facility or additional capacity, while the second was for the development of new gas-fired power plants.
The country has not conducted a thermal power plant tender in over a decade as reserve margins have consistently remained robust at above 30%.
But a sharp rise in power demand is expected following a wave of industrial and data centres investments approvals.
CGSI Research believes Malakoff is well-positioned to secure wins from the upcoming tender, considering the urgent need to maintain supply stability and reserve margins amid surging power demand, its proven track record in thermal plant development and operations and the availability of ready plans and sites/assets.
'We estimate the plant extensions can generate at least RM40mil in net profit annually from 2026.
'This will be further supported by its circa RM950mil mini hydro project and RM660mil waste-to-energy (WTE) plant, which we project can contribute a combined RM35mil in annual net profit,' the research house said in a report.
Additionally, it said a potential 1.4GW greenfield gas plant win from financial year 2030 could mass at least around RM200mil in recurring annual net profit and RM1bil in equity value based on CGSI Research's back-of-the-envelope calculations.
While the stock has rebounded from its lows, CGSI Research believes there is further upside, underpinned by a pipeline of unpriced assets, namely its mini hydro and WTE plants, stake in E-Idaman Sdn Bhd and possible extensions for its expired or expiring plants.
'Hence, we retain our 'add' call. Our target price of RM1.20 conservatively assumes just one joint-venture win.
'All in, we estimate these opportunities are worth at least RM1.2bil or around 25 sen per share, value that is not yet fully priced in at current price levels.'
Valuation-wise, the stock is trading at 5.2 times expected 2026 earnings and offers net dividend yield of 5.5%.
According to the research firm, Malakoff's earnings are poised for an inflection from 2026, driven by improving plant performance and the addition of new renewable energy and thermal capacities.
CGSI noted that prior to 2023, Malakoff's power assets, in particular its coal plants, had suffered operational setbacks due to boiler and turbine issues.
This affected the plants' equivalent availability factors (EAF) and output levels.
However, performance has improved noticeably in recent quarters with EAF showing signs of greater stability, it added.
At the time of writing, shares of Malakoff were trading at 91 sen, up 7.1% year-to-date.
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