Mega First Corporation’s (Mega First or MFCB) valuation gap with utility peers has narrowed in recent months with share price having appreciated by 31% YTD.
Maybank Investment Bank (Maybank IB) today (Apr 25) said the stock’s risk-reward now appears balanced with near-term earnings-accretive events priced-in to some extent.
Maybank IB downgraded Mega First to HOLD with a higher SOP-based TP of MYR4.80 (+2%) following earnings revisions.
There are plans to deploy capital on non-RE projects (farming and hospital).
Don Sahong 5th turbine progressing
Construction of Don Sahong’s 5 th turbine is progressing well, with expected commissioning in Jul 2024. Revised terms for the concession agreement (for all 5 turbines) have been finalised, and is pending formal approval by the Laos government by mid-2024.
Maybank IB does not expect any deterioration in terms. They expect Don Sahong’s contribution to group earnings to increase in FY24 from both the contribution of the 5th turbine and Mega First’s increased effective stake (from 80% to 95%).
Note that the tax holiday for Don Sahong is slated to expire in Oct 2025.
Possible non-RE ventures
There remains ample balance sheet headroom for new projects. In the pipeline are possible non-RE ventures into 1) farming: 2 entities (Mega First Agrotech and Mega First Green Farms) were incorporated in FY23 and 2) hospital: Mega First purchased a 1.3ha piece of land designated for a medical centre in Setia Alam for MYR44m in Feb 2024.
On the RE front, Mega First continues to work towards progressively raising its solar capacity.
Revising earnings
Maybank IB revised their FY24/25/26 net profit forecasts by 0%/+17%/0% respectively as they now assume Don Sahong to begin paying taxes in Oct 2025 (from Jan 2025 previously).
Maybank IB’s TP (based on a sum-of-parts with Don Sahong valued on a DCF) is raised to MYR4.80 (from MYR4.70). With share price hovering around the TP, they downgraded the stock to HOLD (from BUY).
