MFCB: Quarterly Earnings Boosted by Cost Write-Back Amidst Persistent Operational Headwinds

Mega First Corporation (MFCB) reported its fourth-quarter FY25 net profit, which saw a significant uplift from a RM15 million write-back of excess construction costs. This cost adjustment pertained to the fifth turbine of its Don Sahong Hydropower Plant (DSHP), which had been completed in mid-2024.

Despite this one-off boost, MFCB’s overall FY25 net profit declined by 15.7% year-on-year, settling at RM387 million. AmInvestment Bank noted that while the full-year net profit surpassed its internal forecast, it was largely in line with market consensus. However, when excluding the said construction cost write-back, the net profit would have been approximately 7% below consensus expectations. For 4QFY25, the group declared a gross dividend per share (DPS) of 5 sen, bringing the total gross DPS for FY25 to 9.8 sen, matching the previous year.

Operational Headwinds and Segmental Performance

Several operational challenges contributed to the subdued full-year performance. The Edenor Oleo Joint Venture (JV) recorded widened losses, increasing to RM74.3 million in FY25 from RM66.2 million in FY24. This deterioration was primarily due to capacity shutdowns during the first half of FY25 and disruptions to gas supply following an explosion at Putra Heights in 2QFY25.

The Renewable Energy (RE) division, largely driven by DSHP, experienced a 4.8% decline in EBIT, reaching RM517 million in FY25. This was mainly due to the adverse impact of a weaker US dollar, which affects DSHP’s USD-denominated earnings. Higher sales volumes, coupled with lower amortisation and royalty expenses, partially mitigated the currency headwind. Additionally, the resources and packaging divisions faced lower EBIT in FY25, burdened by increased freight costs and heightened competition from China.

Outlook and Investment Recommendation

Looking forward, AmInvestment Bank has adjusted its FY26F net profit forecast downwards by 2.4%, anticipating continued pressure from a weaker US dollar on DSHP’s earnings. The bank estimates that a 10 sen depreciation in the USD against the Malaysian Ringgit could result in a 2% decline in the RE division’s EBIT. The Edenor Oleo JV is also projected to remain in the red.

In light of these factors, AmInvestment Bank has maintained its HOLD rating on Mega First Corporation. The target price has been slightly adjusted to RM3.56 per share from the previous RM3.65 per share, based on a 10x FY26F price-to-earnings (PE) multiple, which is consistent with the company’s five-year average PE. A gross DPS of 10 sen for FY26F is forecast, implying a yield of 3.2%.