MFCB firing on all cylinders

SO long as its power segment remains profitable, Mega First Corp Bhd’s (MFCB) is poised to churn out healthy financial results.

This is judging by its 3Q FY2020 results whereby its energy sales to Electricite du Laos stood at RM137 mil based on the average energy availability factor of 92.4%, a significant improvement from 86.7% in 2Q FY2020 given the onset of the annual wet season in June.

For 9M CY2020, MFCB’s Don Sahong hydropower plant achieved 83.3% energy availability factor and is expected to hit more than 94% in the final quarter on the back of high water levels and absence of scheduled turbine maintenance.

“Meanwhile, water level at the Pakse substation has recently subsided to 3.1-metre after hitting the peak of 7.74-metre last month,” wrote PublicInvest Research analyst Chong Hoe Leong in a results review.

“Nevertheless, we think the current water level is still sufficiently high to run four turbines at near full capacity level of 260MW.”

MFCB continued its fine run in 3Q FY2020 by posting a 512% year-on-year (yoy) jump in net profit to RM89.5 mil (3Q FY2019: RM14.62 mil) with its revenue edging up 68.3% to RM211.21 mil (3Q FY2019: RM125.51 mil).

For the cumulative nine-month period, the company’s net profit strengthened by 224% to RM228.24 mil from RM70.49 mil a year ago.

The power business aside, MFCB’s packaging segment is also expected to continue with strong earnings momentum while its resources segment will likely see margin pressure due to slower off-take by existing customers and a hike in freight rates of several key shipping routes due to container shortage.

All-in, PublicInvest Research maintained its “outperform” call on MFCB with a higher sums-of-parts-based target price of RM8.62 (previously RM8.58) following the expiry of all available employees shares option scheme.

Elsewhere, Maybank IB Research is also bullish on MFCB with two notable developments, namely (i) the deferment of Don Sahong’s fifth turbine construction by a year; (ii) significant expansion plans at its packaging division (RM120 mil capex for two new factories).

The research house raised MFCB’s FY2020/2021/2022 net profit forecasts by 8%/9%/10% to reflect latest operating trends (notably higher packaging contribution) while lowering its FY2020/2021 dividend per share assumptions.

As a whole, it maintained its “buy” rating on MFCB while raising the company’s target price to RM8.00 (from RM7.50 previously) based on a sum-of-parts with Don Sahong valued on discounted cash flow.

At 12 noon, MFCB was up 10 sen or 1.36% to RM7.45 with 1.31 million shares traded, thus valuing the company at RM3.34 bil. – Nov 20, 2020

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