MFCB: Strategic Operational Gains Drive Quarterly Profit Surge, Target Price Bolstered
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The company showcased a robust performance in the third quarter of fiscal year 2025 (3QFY25), reporting an 11% year-on-year increase in core profit. This strong quarterly showing, largely underpinned by effective cost management and resilient contributions from key business segments, has garnered positive attention from investment analysts, leading to a bolstered target price and a reiterated “BUY” recommendation.
Performance Review
For 3QFY25, core profit ascended to RM134.2 million, demonstrating significant operational efficiency and strategic execution. This impressive quarterly growth was primarily driven by enhanced contributions from the renewable energy and packaging segments, which saw their core earnings increase by 5.1% and 9.4% respectively. Despite some earlier year-to-date challenges, the overall 9-month core profit for FY25 stood at RM325.5 million, aligning with full-year expectations.
Revenue for 3QFY25 also experienced a healthy uptick of 3.3% year-on-year to RM384.2 million. This revenue growth was fueled by the one-off recognition of construction revenue from a solar farm project in Maldives and robust sales expansion in the packaging segment, which grew by 24.6% year-on-year.
Strategic Initiatives and Challenges
Management’s unwavering focus on cost optimization and production efficiency across its operations, particularly within the packaging and resources segments, played a critical role in mitigating margin pressures and elevated operational costs. These initiatives proved vital in sustaining profitability amidst a dynamic market landscape.
Despite these positive developments, the company navigated several headwinds. The renewable energy segment faced a softer performance due to adverse currency translation impacts from a weaker USDMYR and a slight decline in average tariff rates. Additionally, the Don Sahong Hydropower Plant experienced a slip in its Energy Availability Factor (EAF) from 87.2% to 81.1%, primarily attributed to additional installed capacity. The resources segment contended with softer lime product demand in both local and overseas markets, coupled with lower average selling prices and heightened competition, resulting in a 21.3% year-on-year sales retreat.
Future Outlook
The outlook for the company remains optimistic, particularly concerning its solar power initiatives. The 51MWp Corporate Green Power Programme solar project in Tronoh is progressing well and remains firmly on track for commissioning in 1Q 2026. While the 11.4 MWp Maldives project encountered minor commissioning delays due to state-owned grid connectivity issues, its eventual completion, alongside the Tronoh project, is set to significantly expand the installed solar capacity from the current 32.1 MWp to an impressive 97.2 MWp. This substantial expansion underscores the company’s strategic commitment to renewable energy growth.
Furthermore, the company is actively pursuing strategies to diversify its customer portfolio and enhance operational efficiency within its resources and packaging segments. These efforts aim to counter persistent market challenges and mitigate ongoing margin pressures, positioning the company for sustained long-term growth.
Analyst View and Recommendation
TA SECURITIES has maintained its positive stance on the company, reaffirming a “BUY” recommendation. The investment bank has established a new target price of RM0.25, representing a significant potential upside of 25.0% from the last traded price of RM0.20. This revised target price reflects the analysts’ confidence in the company’s strategic direction, improved operational performance, and promising growth prospects in its key business segments.
