Mega First’s 3Q in line with market expectations


MEGA First Corp Bhd’s core net profit (excluding the unrealised foreign exchange) of RM89 million in the third quarter of 2021 (3Q21) was in line with market expectations.

Maybank Investment Bank Bhd (Maybank IB) research analyst Tan Chi Wei stated that Mega First’s 3Q21’s result took its nine-month core net profit to RM248 million, which is 73% of Maybank IB and 72% of consensus full-year forecasts, respectively.

“Segmental performances were again mixed, with the renewable energy (main earnings contributor) division being in line, while the resources and packaging divisions were below expectation,” stated Tan in a research note on Mega First yesterday.

Mega First did not declare any dividend for the quarter which is in line with past practice.

Its subsidiary Don Sahong Power Company Ltd scheduled turbine maintenance coincided with lower operating expenses as receivable days stayed stable.

Don Sahong’s 3Q21 availability stood at 90.1%, against 95.2% in 2Q21 and 92.4% in 3Q20, the report stated.

“Resources earnings before interest and tax (Ebit) was lower quarter-on-quarter (QoQ) due to high fuel costs and revenue softness as maintenance shutdown at a key customer and reduced export competitiveness from high freight costs,” the analyst wrote.

Mega First’s packaging business’ Ebit grew substantially QoQ from a small base due to the two months consolidation of recently acquired Stenta Films (M) Sdn Bhd.

Maybank IB maintained Mega First earnings forecast and a target price of RM4.30 based on a sum of parts valuation and incorporating Don Sahong’s discounted cashflow and 25 sen per share of new projects.

“Management expects to commence construction of Don Sahong’s fifth turbine in December 2021, with targeted completion in 3Q24,” Tan added.

The analyst noted the valuation of Mega First also required further clarity on the potential impact of Budget 2022’s proposed removal of tax exemption on foreign income remittance.


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