Highlight Malakoff eyes regional electricity market post-IPO

by **Cals** Sat 18 Apr 2015, 01:11

Highlight
Malakoff eyes regional electricity market post-IPO

KUALA LUMPUR (Apr 17): With little room to grow in the local power scene in the medium term, Malakoff Corp Bhd is planning to explore new regional markets where energy insufficiency needs to be addressed, post its initial public offering (IPO).
MMC Corp Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) group managing director Datuk Seri Che Kalib Mohamad Noh said the group does not discount the possibility of the independent power producer (IPP) going regional.
“Regionally, demand for electricity is growing at a very fast rate. As we all know, the engine for global growth is Asia and I think the president of Indonesia has repeatedly said Indonesia needs a 36,000MW power plant, which is by any standard huge," he told a press conference after the launch of Malakoff’s prospectus here today.
“We believe there could be an opportunity for Malakoff to explore the (regional market), to look at this urgent need by regional countries to have new power plants,” said Che Khalib.
He noted that even though the Malaysian government has awarded power plants up to 2021, it is not something that a company can build within a short period of time as it takes about four years to build a new coal-fired power plant.
“There is always room for the future because at the moment Malaysia’s total demand is 16,000MW. If you assume a 5% increase every year, then we are talking about 800MW of new capacity required by the country on a yearly basis.
“So it’s like every year you’d need one additional power plant. We still think that there is opportunity for Malakoff in the Malaysian market,” he said, adding that looking back at Malakoff’s history, it has been taking up on new assets every two to three years.
MMC (fundamental: 1; valuation: 1.4) currently holds a 51% interest in Malakoff. After its listing on the Main Market of Bursa Malaysia, which is slated for May 15, MMC’s shareholding in the IPP will be diluted to 37.8%.
Malakoff’s IPO entails the sale of 1.52 billion existing and new shares at 10 sen each. The amount comprises of 521 million existing shares and a public issue of 1 billion new shares. This represents 30.4% of its enlarged issue and paid up share capital.
At a tentative price of RM1.80, Malakoff is looking to raise up to RM3.15 billion, which includes the overallotment option. This will be the largest IPO for the country since 2012.
According to its prospectus, 90% of the IPO proceeds will be utilised to fully redeem an RM1.8 billion Junior Sukuk Musharakah programme. Of the remaining amount, 5% will be utilised for business expansion, 2.6% for working capital and 2.4% for listing expenses.
Malakoff has secured 12 cornerstone investors, namely Lembaga Tabung Haji, CIMB-Principal Asset Management Bhd, Maybank Asset Management Sdn Bhd, Maybank Islamic Asset Management Sdn Bhd, Great Eastern Life Assurance (M) Bhd and RHB Asset Management Sdn Bhd.
The group has a target dividend pay-out ratio of not less than 70% of its consolidated profit attributable to its equity holders.
Others include UOB Asset Management (M) Bhd, Hong Leong Asset Management Bhd, Eastspring Investment Bhd,Social Security Organisation (SOCSO), Kencana Capital Sdn Bhd and Corston-Smith Asset Management Sdn Bhd.
Malakoff chief executive officer Datuk Seri Syed Faisal Albar said the company’s combined overseas assets contributed about 30% to 35% of its profits last year.
“Going forward, we will maintain at least at that level,” said Syed Faisal, adding that Malakoff is always actively looking to grow its business as it has always been the company’s philosophy.
He also noted that within the seven years after Malakoff was privatised, it has grown via acquisitions and new contract awards.
Syed Faisal cited the company’s acquisition of a 50% stake in Australian firm Macarthur Wind Farm in 2013, which marked Malakoff’s entry into the renewable energy business.
In Malaysia, Malakoff has a total of six operational plants and one that is currently under construction, which is the Tanjung Bin 4 coal power plant in Johor. Elsewhere, the company has four operational plants and a water distillation plant in Oman which is under construction.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)