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Malakoff Shares Up On Agreement To Solve Disputes

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KUALA LUMPUR – The share price of Malakoff Corporation Bhd on Bursa Malaysia was marginally higher this morning following the agreement signed by its subsidiary, Tanjung Bin Power Sdn Bhd (TBP), to resolve and settle the disputes relating to previous operational issues at the later’s power plant.

The stock was up half-a-sen to RM1.07 with 15.26 million shares traded.

PublicInvest Research said this new development could improve Malakoff’s 2017 financial year forecast (FY17F) earnings.

“Although this will be a one-off gain in FY17F, we see this piece of news as positive for Malakoff as this will cushion the earnings pressure from the unexpected lower capacity payment from Tanjung Bin Energy in the second quarter FY17, as well as lower contribution from Segari Energy Ventures in second half FY17 onwards,” it said in a note today.

The research firm maintained its neutral call on Malakoff at a target price of RM1.29.

Nevertheless, PublicInvest believed the near-term sentiment might remain weak due to lower-than-expected earnings in the forthcoming second quarter results owing to recent operational challenges.

To recap, TBP was seeking damaged claims from several parties through litigation action in December 2015 and arbitration proceedings in November 2016.

The total claimed amount was estimated at around RM785 million, as at November 2016, due to 22 different boiler tube failure incidents at TBP’s power plant and the inability of the power plant to meet certain required output conditions.

TBP will enter into a consent judgement in the litigation action strictly without admission of liability basis, and withdraw and discontinue the arbitration proceedings, based on the agreed terms and conditions, which has yet to be disclosed. -BERNAMA

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