Malakoff Corporation Bhd’s operational recovery is gaining momentum, with its Tanjung Bin Power (TBP) plant expected to return to normal operations in the coming months, while the company pushes ahead with plans for a new 1.4GW gas-fired power plant in Port Dickson, according to RHB Investment Bank.
Following a meeting with Malakoff’s senior management, RHB maintained its “Buy” recommendation on the utility company with an unchanged target price of RM1.06, implying about 35% upside from current levels and an estimated FY2026 dividend yield of around 5%.
Tanjung Bin operations returning to normal
The research house said TBP is on track for full operational recovery after suffering a steam turbine generator failure last November, which caused its availability factor to plunge to 37% in the first quarter of 2026 from 64% in the preceding quarter.
Repair works on the damaged turbine rotor have now been completed, with operations scheduled to resume in August.
RHB expects the plant to make a positive earnings contribution from the fourth quarter onwards.
The research house also noted that TBP’s unscheduled outage rate is expected to be reset in 2027, allowing the plant to receive full capacity payments under its power purchase agreement (PPA).
Separately, operations at the Tanjung Bin jetty have also normalised after conveyor belts resumed service last month following the complete removal of debris that had disrupted coal deliveries.
RHB believes Malakoff could potentially receive insurance compensation for both the turbine failure and the jetty disruption, although it has factored in an additional RM40 million in transhipment costs for FY2026.
Gas-fired plants progressing as planned
The utility group’s gas generation assets are also progressing according to schedule.
Its 350MW Prai power plant commenced operations in April and will continue supplying electricity until March 2030.
Meanwhile, the combined 1.7GW GB3 and Segari Energy Ventures (SEV) plants are expected to begin operations in January and July 2027 respectively, with both facilities operating through December 2029.
The extensions were previously awarded by the government to ensure sufficient electricity supply amid growing demand.
RHB has incorporated earnings contributions from all three plants into its financial forecasts.
Port Dickson project targeted for 2027 PPA
Looking ahead, Malakoff is targeting to sign a 15-year power purchase agreement for a proposed 1.4GW gas-fired power plant in Port Dickson during the first half of 2027.
The company has already reserved four 700MW gas turbines from Mitsubishi, which could power two planned 1.4GW facilities in Port Dickson and Segari.
Management is aiming to commission the Port Dickson plant in 2031, followed by the Segari facility in 2032.
RHB said the projects would arrive at an opportune time, as the existing Tanjung Bin Power plant’s PPA is scheduled to expire in September 2031.
Should Malakoff secure the Port Dickson project, the research house estimates it could increase its target valuation by approximately 39%.
Earnings forecasts revised lower
Despite maintaining its positive long-term outlook, RHB reduced its earnings per share forecasts for FY2026 to FY2028 by between 8% and 14%.
The revisions mainly reflect the prolonged nine-month outage at TBP and the higher coal transhipment costs incurred following the disruption at the Tanjung Bin jetty.
However, the target price remains unchanged after rolling forward its valuation base to FY2027, which reflects the expected full normalisation of the Tanjung Bin complex.
The valuation is based on 24 times FY2027 price-to-earnings, incorporating a 12% environmental, social and governance (ESG) discount.
Malakoff is scheduled to announce its second-quarter 2026 financial results on Aug 17, with RHB expecting earnings to improve sequentially, supported by stronger contributions from Tanjung Bin Energy following the resumption of operations earlier this year.
