COMMENTS ON MALAKOFF CORPORATION BERHAD (5264)

FIGURE 1: MALAKOFF CORPORATION BERHAD LAST 5 YEARS SHARE PRICE TREND

 

**analysis based on 2019 annual report.

1.       GENERAL INTRO: The core business includes power generation, water desalination, operations & maintenance and waste management and environmental services. In Malaysia, MALAKOFF own an effective generation capacity of 5,822 MW comprising 6 power plants that run on gas, oil and coal.

 

2.       NOTABLE POINTS:

a.       This is a utility company, whereby its income is very stable, however, its growth is slow.

b.      This counter pays a very high ratio of its earnings as dividend, normally the payout ratio is close to 100%, leading to high dividend yield of around 7.4%. Hence, this counter is well supported by institutional investors such as EPF and various investment funds.

 

3.       IS THIS COUNTER A STRONG GROWTH STOCK?        

a.       REVENUE RANGE (RM million): 7278.4 million as reported in 2019 annual report, this is a high revenue company.

b.      SHARE PRICE: from 2016-2020, share price decreased from around RM1.70 to current level of around RM0.80.

c.       EARNING PER SHARE (EPS): earning per share in last 5 years was overall decreasing, from 9.76 to 6.55 sen

d.      PRICE TO EARNINGS (P/E) RATIO: current P/E ratio is moderate at 12.52, indicating the share price is reasonable

e.      FUTURE POTENTIAL/PROSPECTS: share price expect to be stable in the next few years

f.        CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets and other investments amount to about RM 962.4 million, which is around 3.6% of total assets.

 

4.       IS THIS A STRONG DIVIDEND STOCK?             

a.       DIVIDEND YIELD: in 2019 financial year, MALAKOFF declared a dividend payout of 6.55 sen per share to shareholders, which amounts to a dividend yield of 7.44%.

b.      DIVIDEND PAYOUT RATIO: in 2019 financial year, MALAKOFF paid out 100% of its earnings to shareholders, in the last five years, dividend payout ratio ranged from 72 to 105%.

c.       CONSISTENCY: the dividend payout was consistent, the dividend paid to shareholders in the last five years ranged from 5.6 to 7 sen.

 

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2019 financial year, MALAKOFF reported a low return of shareholders’ equity, at 5.81%. In the last five years, its ROE ranged from 4.86 to 7.85%.

b.      COST-TO-INCOME RATIO: cost-to-income ratio is high, at 1417%.

 

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 2475 million, equivalent to RM 0.56 per share.

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is very well supported by institutional investors, there are 29 institutional investors at top 30 major shareholders list, including EPF (3.22%), SKIM AMANAH SAHAM BUMIPUTERA (6.42%), KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (8.92%) and insurance companies/investment funds. Its major shareholders are Anglo-oriental (Annuities) Sdn Bhd (20.08%) and MMC Corporation Berhad (18.37%).

 

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