"Malakoff's E-Idaman unlikely to move the needle for earnings"

KUALA LUMPUR: Malakoff Corp Bhd's expansion of its waste management and environmental services into Kedah and Perlis is expected to bring in double digit returns to the group, however it is unlikely to move the needle for its earnings.

Malakoff's unit Tuah Utama Sdn Bhd last Friday (October 27, 2023) signed a conditional share sale and purchase agreement (SSA) with Metacorp Bhd for a 49 per cent interest in E-Idaman Sdn Bhd for RM133.2 million cash.

E-Idaman's subsidiary Environment Idaman Sdn Bhd has a 22-year concession from the government to provide waste collection and disposal services for municipal wastes for Kedah and Perlis.

"Although the acquisition is expected to deliver a commendable equity internal rate of return (EIRR), earnings accretion towards our financial year 2024-25 (FY24-25) forecast estimates is inconsequential at about four per cent," Public Investment Bank (PublicInvest) Research said in its note today.

It has maintained its Outperform call on the company and make no changes to its target price for Malakoff at RM0.70.

PublicInvest Research expects an EIRR of 11-12 per cent for Tuah Utama's interest in E-Idaman for the remaining concession period until 2033.

The research firm has raised its earnings estimates for FY24-25 by 4 per cent to account for E-Idaman's contribution to Malakoff's profits.

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