Developed by Malaysia’s Mega First Corp Bhd, the Don Sahong hydroelectric plant in Laos, near the Cambodian border, was commissioned and linked to the Kingdom’s national grid last year. FACEBOOK
Arned with a healthy balance sheet, Malaysia’s Mega First Corp Bhd (MFCB) plans to pare down debts further as it explores more renewable energy projects in Southeast Asia as part of its expansion drive.
As it is, it has a low net gearing level of 0.26 times and after taking into account its yearly capital expenditure (capex) and dividend payouts, it has excess cash flow of at least 200 million ringgit ($48.6 million) from the projected annual operating cash flow of at least 500 million ringgit.
After its meeting with MFCB management, PublicInvest Research said MFCB continues to see a clear and focused approach towards all the core segments, namely, renewable energy, resources and packaging.
“While exploring for new opportunities in hydropower projects, the packaging segment will be a key earnings driver for the group on the back of its massive capacity expansion in paper and flexible packaging, and also through the acquisition of a 75 per cent stake in Stenta Film,” it said.
Based on that outlook, it has revised upwards its earnings forecast by two-to-four per cent. This is based on the expected earnings contribution from Stenta Film, as the recent acquisition will help double the packaging sales in the next two years.
“Based on our higher pre-tax margin of 13-15 per cent for the packaging segment, it should skyrocket from financial year 2020’s 9.4 million ringgit to 33 million ringgit, 56 million ringgit and 75 million ringgit for fiscal years 2021-2023, respectively,” said PublicInvest.
Led by that, the research house has also lifted its target price from RM8.63 a share to RM8.73 and retained its “outperform” call on the stock.
Elaborating on the paper and packaging business, the research house expects continued growth with capacity expansion and robust demand although there will be some cost pressure coming from resin, paper and logistics.
It said resin, which is the largest cost component, has shot up more than 60 per cent and MFCB is unable to fully pass on the additional costs to consumers due to competition and time-lag effects.
“We have a strong three-year CAGR [compounded annual growth rate] sales growth expectation of more than 50 per cent for the packaging unit, which could be the second largest revenue contributor to the group this year,” the research house said.
It added that when combined with the contribution from Stenta, packaging sales are expected to deliver more than 500 million ringgit in 2023, making up more than 60 per cent of the group’s topline. On the renewable business it said the company had an appetite for growing 50-100MW a year but was unable to find good customers who can fulfil its criteria.
THE STAR (MALAYSIA)/ASIA NEWS NETWORK
