Malakoff’s proposed sale of Aussie wind farm a positive move, say analysts

The independent power producer announced its proposed disposal for RM1b in cash


MALAKOFF Corp Bhd’s intention to sell its 50% participating interest in the unincorporated joint venture of the MacArthur Wind Farm (WF) in Australia held via Malakoff Wind Macarthur Pte Ltd is viewed as a positive move, analysts have observed.

On Tuesday the independent power producer announced its proposed disposal for A$357million (RM1.02 billion) in cash.

The stake will be acquired by AMP Capital Group, and is targeted to complete by the first quarter of 2020.

TA Securities Research is largely positive on the deal — given the asset monetisation offers an attractive return and valuations.

“There are limited operational synergies with Macarthur as it is solely operated by AGL Energy Ltd outside of Malakoff’s base in Malaysia. “Moreover, post disposal, Malakoff’s balance sheet would be substantially deleveraged to an estimated 1.06x,” TA stated in a research note yesterday.

The optimism would be increased if Malakoff embarks on capital recycling using the sales proceeds as it would cushion earnings erosion arising from loss of Macarthur’s contribution.

Malakoff intends to use the proceeds from the proposed disposal to repay the acquisition loan of Macarthur (A$140 million), transaction costs (A$6.4 million) and the balance to be deposited into disposal proceeds account in accor- dance with the provision under the Trust Deed of the Sukuk (A$210.5 million), subject to the approval of the proposed disposal by the sukuk holders of the RM5.4 billion sukuk murabahah issued by Malakoff Power Bhd.

The proposed disposal will give rise to an estimated net gain of RM546 million.

TA Securities also maintained its earnings forecast and sum-of-the-parts target price of 93 sen pending completion of the deal.

“We expect improved financial year 2019 earnings, underpinned by; reduced logistic costs for coal procurement — following completion of jetty facilities, and recovery of operations at Tanjung Bin Energy Plant (TBE).

“Malakoff is a leading contender for new domestic renewable energy projects. This includes hydro, large scale solar, biogas and Waste-to-Energy projects etc,” TA added.

Malakoff’s shares closed yesterday at 3.5% or 2.5 sen higher at 85.5 sen, valuing the company at RM4.2 billion.

PublicInvest Research also maintained a ‘Trading Buy’ call on Malakoff with an unchanged target price of RM1.02.

“We expect the loss of earnings contribution from Macarthur WF to be partly offset by recent acquisition of 12% stake in Shuaibah as well as better performance from TBE,” it said.

On the financial impact from the sale, the research house said Malakoff’s total borrowing is expected to fall by about RM1.8 billion, resulting in gearing to improve from 2.3 times to 1.9 times.

Macarthur WF is a 420MW operational wind farm located in Victoria, Australia.

It consists of 140x3MW V112 Vestas wind turbine generators and has achieved practical completion in January 2013. The windfarm is the largest in the Southern Hemisphere.