Mega First’s Renewable Energy Empire: Sustainable or Just a Lucky Streak?

Over the past decade Mega First has grown its renewal energy segment so that today its is the main earnings contributor. As can be seen from the left part of the chart, the contribution for the other segments are not very significant.

When you look at the earnings trend for the Renewal Energy division, you have to remember that there have been changes in the source of revenue over the past 12 years. Refer to the right part of the chart.

https://i.postimg.cc/fy84M3DK/Mega-First-earnings.png

Initially the revenue and earnings came mainly from the China and Tawau projects. When these ended in 2017, the revenue from the construction of the Loas hydro plant became a significant contributor.

In 2022, with the completion of the construction of the hydro project, power sales from the hydro project became the biggest revenue contributor.

Its main renewal energy business today comes from its hydro plant in Laos that has a long-term concession (until 2045) providing it with stable cash flows.

Over the past few year, the Group has delivered good returns and is financially sound. Part of this good performance was due to the tax incentives for the hydro plant. My valuation assuming that there is no longer any tax incentives showed that the market price reflects the business value.

Overall, while Mega First has built a strong renewable energy platform, its long-term attractiveness as an investment will depend on how well it navigates some the following challenges and opportunities.

• Will the Laos economy have a long growth runway?

• How will the company maintain its earnings momentum once the tax benefits taper off?

• Are there plans to acquire new projects or enter new markets to provide a growth path?

For more insights refer to Is Mega First Corp an investment opportunity? https://www.i4value.asia/2024/12/is-mega-first-corp-investment.html#more

行家建议：

据悉，新版PPA与CA将涵盖所有5台涡轮机，采用更平稳的电价模式，并设定新的25年特许期。

由于此前，东萨宏水电站（Don Sahong Dam）已预付1亿美元（约4.45亿令吉）以获水域使用权，这意味着新的特许期内，将不再支付特许使用费。

尽管不再享有免税优惠，但仍可获得一定的税收激励，这是一个积极的惊喜，因为目前我们的估值模型中采用的是标准公司税率。

我们估计，此项目的实际税率为15%（标准公司税率为24%）及平均电价保持不变的前提下，新PPA与CA对2025至2026财年的核心盈利预测，将上涨不到5%。

此外，管理层表示，包装业务将在完成新的上游和下游工厂后将提高新产能，因此，等达到一定规模后，有意分拆该业务。

管理层还指出，由于资本支出需求减少（主要集中在企业绿色电力计划（CGPP）以及第5大型太阳能项目（LSS5）），未来可能会加大股息派发力度。

鉴于新协议尚未完成，我们维持盈利预测与5.36令吉目标价，以及定在“超越大市”评级不变。