PublicInvest Research Results Review
KDN PP17686/03/2013 (032117)
MEGA FIRST CORPORATION Outperform
A conglomerate company that is mainly involved in power, resources and property businesses.
Current Price RM3.67
Expected Return +58.0%
Previous Target Price RM5.80
Sector Conglomerate
Bursa Code 3069
Bloomberg Ticker MFCB MK
Shariah-compliant Yes
3-Month Average Vol (‘000) 605.7
No. of Shares (m) 942.8
| 1M | 3M | 6M | |
|---|---|---|---|
| Absolute Returns | -3.0 | -11.4 | -14.2 |
| Relative Returns | -3.2 | -10.3 | -14.3 |
| % | |
|---|---|
| Goh Nan Kioh | 35.3 |
| Employees Provident Fund | 9.9 |
Improving Momentum in 2H
The group registered 1HFY25 core profit of RM191.3m (-10% YoY), accounting for 41% and 42% of our and the street’s full-year expectations, respectively. The weaker-than-expected results were mainly due to adverse currency translation (USDMYR: RM4.38, -7.4% YoY) despite a 9.2% increase in electricity sales generation to 1,053.3 GWh driven by the expanded capacity. The Energy Availability Factor (EAF) stood at 74.6%. Meanwhile, the losses from the JV-owned oleochemical business, Edenor, surged to RM44.9m, primarily due to gas supply disruption following the Putra Heights pipeline explosion. Nevertheless, we make no changes to our earnings forecast as we expect a strong earnings recovery in the 2H 2025. Maintain Outperform with an unchanged SOP-based TP of RM5.80. A higher DPS of 4.75sen was declared for the quarter (vs 2QFY24: 4.5sen).
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1HFY25 revenue climbed 2.4% YoY to RM340m. The group’s revenue rose from RM332m to RM340m, primarily driven by the one-off recognition of RM4m in construction revenue from the solar farm project in Maldives and RM20.7m from the food security segment, partially offset by weaker sales from renewable energy (-3.5% YoY) and resources (-15% YoY) segments.
Renewable energy sales fell from RM156m to RM151m as Don Sahong hydropower sales dipped 3.6% to RM151m due to a 9% currency translation loss, partially offset by a 5.4% increase in hydro energy sales revenue in dollar terms attributed to a 10.9% rise in electricity energy sales from the 5th turbine. The hydro power plant achieved an average EAF of 80.3%. Meanwhile, solar sales rose 11% YoY to RM3m. On the other hand, resources sales shed 14.9% YoY to RM48.2m, dragged by soft export demand for lime production and heightened competition. Packaging sales remained steady at RM104.6m as the group managed to defend its market position amid industry overcapacity and intense competition.
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Core profit slipped 11% YoY. Excluding the exceptional items, the group core earnings dropped from RM114m to RM101m, attributed to a slump in earnings contribution from the resources (-34% YoY) and packaging (-62% YoY) segments. Renewable energy earnings improved by 2.4% YoY at RM113m, thanks to reductions in i) net royalty (arising from acquisition of water rights assets), ii) net interest expense, and iii) amortisation charge (arising from concession extension), which more than offset the impact of lower tariffs and currency translation losses.
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Recovery signs for the oleochemical business. Due to the operational challenges, the JV-owned Edenor losses registered a loss of RM16.4m in 2QFY25 (1HFY25: -RM44.9m). With gas supply fully resumed since early July coupled with progressive ramp up, management expects a marked turnaround in 2H. Lastly, the food security segment made a small loss of RM5m as the green farming in Perak is still at an early stage.
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F | CAGR |
|---|---|---|---|---|---|---|
| Revenue | 1,317.6 | 1,741.8 | 1,390.9 | 1,465.0 | 1,547.8 | -3.9% |
| Gross Profit | 569.3 | 656.7 | 653.7 | 688.5 | 727.5 | 3.5% |
| Pre-tax Profit | 476.7 | 509.3 | 526.4 | 564.0 | 599.7 | 5.6% |
| Core Net Profit | 382.5 | 453.9 | 470.9 | 485.8 | 520.7 | 4.7% |
| EPS (Sen) | 40.6 | 48.2 | 50.0 | 51.5 | 55.3 | 4.7% |
| P/E (x) | 9.0 | 7.6 | 7.3 | 7.1 | 6.6 | |
| DPS (Sen) | 8.3 | 9.0 | 10.0 | 11.0 | 11.0 | |
| Dividend Yield (%) | 2.2 | 2.5 | 2.7 | 3.0 | 3.0 |
Source: Company, PublicInvest Research estimate
Don Sahong Hydropower Project – Resilient outlook
Don Sahong Hydropower plant completed the scheduled overhaul of one turbine and the annual maintenance of the remaining four units. Since June, all five turbines have been operational in tandem with the onset of the wet season. As river flows are higher together with the higher EAF, earnings are expected to be significantly stronger in the 2H compared to the 1H.
Solar- More installed capacity in the pipeline
32.1MWp of solar generation capacity is operational, with an additional 62.4MWp expected to be commissioned in the latter part of 2025. Upon completion, total installed capacity will reach 94.5MWp. As part of a consortium, the group has submitted its bid for the 400 MWh Battery Energy Storage Scheme tender on 31st July 2025, and it will also continue to pursue opportunities under the Corporate Renewable Energy Supply Scheme.
According to the The Edge Malaysia, the Battery Energy Storage Scheme (BESS), which is also known as the MyBEST programme, aims to install four battery assets, each with a capacity of 100MW/400MWh. These batteries are designed to store solar-generated electricity during the day and release it back into the grid during periods of higher power demand. The surge of solar power in the daytime often goes unused as there is sufficient battery storage available to keep it for release at night, when power demand is higher and can strain the grid. The winners are expected to be shortlisted as early as Oct, with full operation of the projects slated to begin in 2027. The estimated cost for each project is between RM270m-RM300m, depending on the type of battery system used and construction costs. According to the request for proposal, the battery system must be operational for 15 years, starting no later than 30th April 2027. The batteries must maintain a state of health of at least 75% or a dispatchable energy level of 300MWh in their 15th year of operation. The capacity specifications mean each battery can discharge up to 100MW per hour, with a maximum discharge time of four hours.
BESS operators are expected to be paid based on both storage capacity, which is paid regardless of asset utilisation and a service tariff, which is determined by the number of times the battery is actually used to store and supply energy to the grid.
Resources- Subdued outlook persists
The operating environment remains challenging with demand weighed down by slower economic activity and stiffer competition from regional suppliers, particularly from China. Nevertheless, conditions are expected to gradually stabilise over the remainder of 2025.
Packaging- The worst is over
Management sees encouraging signs that the market has bottomed as the imbalance between supply and demand, which drove intense price competition earlier in the year, appears to be easing and a gradual recovery is anticipated in the 2H 2025.
| FY Dec (RM m) | 2Q25 | 1Q24 | 1Q25 | QoQ chg (%) | YoY chg (%) | FY25 | FY24 | YoY chg (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 339.9 | 331.9 | 341.5 | -0.5 | 2.4 | 681.5 | 645.4 | 5.6 | Excluding construction revenue of RM4m, it would have been a modest growth of 1.2% YoY |
| Cost of sales | -193.3 | -178.8 | -210.9 | -8.3 | 8.1 | -404.3 | -357.2 | 13.2 | |
| Gross profit | 146.6 | 153.1 | 130.6 | 12.3 | -4.2 | 277.2 | 288.2 | -3.8 | |
| Other income | 7.9 | 11.0 | 8.2 | -3.7 | -28.2 | 16.2 | 51.2 | -68.4 | |
| Operating expenses | -12.6 | -2.5 | -5.8 | >100 | >100 | -18.4 | -12.6 | 46.0 | |
| Administrative and distribution exp | -19.9 | -17.9 | -22.4 | -11.2 | 11.2 | -42.3 | -35.0 | 20.9 | |
| Operating profit | 122.0 | 143.7 | 110.6 | 10.3 | -15.1 | 232.7 | 291.8 | -20.3 | |
| Finance costs | -14.3 | -15.9 | -11.4 | 25.4 | -10.1 | -25.7 | -32.2 | -20.2 | |
| Share of results in JV | -16.4 | -9.5 | -28.5 | -42.5 | 72.6 | -44.9 | -23.5 | 91.1 | |
| Pre-tax profit | 91.3 | 118.3 | 70.7 | 29.1 | -22.8 | 162.1 | 236.1 | -31.3 | |
| Tax expense | -3.9 | -5.8 | -4.8 | -18.8 | -32.8 | -8.7 | -15.6 | -44.2 | |
| Net profit | 87.4 | 112.5 | 65.9 | 32.6 | -22.3 | 153.4 | 220.5 | -30.4 | |
| Core profit | 101.4 | 114.4 | 89.9 | 12.8 | -11.4 | 191.3 | 212.5 | -10.0 | After taking into the adjustments of construction profit, insurance claim, share of loss in JV & associates and fair value loss on put option liability |
| Core EPS (sen) | 10.8 | 12.1 | 9.5 | 12.8 | -11.4 | 20.3 | 22.5 | -10.0 | |
| DPS (sen) | 4.8 | 4.5 | 0.0 | – | 5.6 | 4.8 | 4.5 | 5.6 | |
| Gross Margin (%) | 43.1 | 46.1 | 38.2 | – | – | 40.7 | 44.7 | – | |
| Pre-tax Margin (%) | 26.9 | 35.6 | 20.7 | – | – | 23.8 | 36.6 | – | |
| Net Margin (%) | 25.7 | 33.9 | 19.3 | – | – | 22.5 | 34.2 | – | |
| Effective tax rate (%) | 4.3 | 4.9 | 6.8 | – | – | 5.4 | 6.6 | – |
| FY Dec (RM m) | 2Q25 | 2Q24 | 1Q25 | QoQ chg (%) | YoY chg (%) | FY25 | FY24 | YoY chg (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue: | |||||||||
| Renewable Energy | 150.6 | 156.1 | 131.8 | 14.3 | -3.5 | 282.3 | 293.8 | -3.9 | Mainly dragged by a 9% currency translation loss due to softer USD currency despite higher energy sales in USD by 5.4% |
| Resources | 48.2 | 56.7 | 55.9 | -13.8 | -15.0 | 104.2 | 120.4 | -13.5 | Dampened by soft export demand for lime products amid rising competition |
| Packaging & Labels | 104.6 | 104.2 | 101.3 | 3.3 | 0.4 | 205.9 | 207.0 | -0.5 | Managed to defend its market share despite industry overcapacity and intense competition |
| Construction Revenue | 4.0 | – | 19.2 | -79.2 | – | 23.1 | 0.0 | – | |
| Investment holdings & Others | 32.5 | 14.9 | 33.3 | -2.4 | >100 | 65.9 | 24.2 | >100 | |
| 339.9 | 331.9 | 341.5 | -0.5 | 2.4 | 681.4 | 645.4 | 5.6 | ||
| Pre-tax profit: | |||||||||
| Renewable Energy | 112.8 | 110.2 | 88.8 | 27.0 | 2.4 | 201.6 | 199.0 | 1.3 | Attributed to reductions in net royalty, net interest expense and amortisation charges |
| Resources | 8.3 | 12.6 | 9.7 | -14.4 | -34.1 | 18.0 | 27.1 | -33.6 | Margin was affected by higher freight charges and unit production costs |
| Packaging & Labels | 3.5 | 9.1 | 4.4 | -20.5 | -61.5 | 7.9 | 17.7 | -55.4 | Hit by stiff market competition and weaker USD |
| Construction Profit | 0.5 | 0.0 | 2.4 | -79.2 | – | 2.9 | 0.0 | – | |
| Investment holdings & Others | -33.8 | -13.7 | -34.6 | -2.3 | <-100 | -68.4 | -7.7 | >100 | |
| 91.3 | 118.2 | 70.7 | 29.1 | -22.8 | 162.0 | 236.1 | -31.4 |
| Sum-Of-Parts Valuations | Valuation Basis | Value (RMm) | RM/share |
|---|---|---|---|
| Renewable Energy | 95% stake (WACC: 7%) | 4,275.1 | 4.54 |
| Resources | 18x FY26 EPS | 348.6 | 0.37 |
| Packaging & Label | 69% stake based on 18x FY26 EPS | 494.0 | 0.52 |
| Investment in quoted shares | Book Value | 88.0 | 0.09 |
| Investment Properties | Book Value | 261.6 | 0.28 |
| Target Price (RM/share) | 5,467.4 | 5.80 | |
| No. of shares (m) | 988.3 | ||
| Treasury shares (m) | -45.8 | ||
| Share base (m) | 942.5 |
Source: Company, PublicInvest Research
INCOME STATEMENT DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Revenue | 1,317.6 | 1,741.8 | 1,390.9 | 1,465.0 | 1,547.8 |
| Gross Profit | 569.3 | 656.7 | 653.7 | 688.5 | 727.5 |
| EBIT | 530.3 | 637.7 | 586.7 | 616.3 | 649.5 |
| Finance costs | -40.0 | -62.2 | -60.3 | -52.3 | -49.8 |
| Pre-tax Profit | 476.7 | 509.3 | 526.4 | 564.0 | 599.7 |
| Income Tax | -25.1 | -18.3 | -27.5 | -50.2 | -50.9 |
| Effective Tax Rate (%) | 5.3 | 3.6 | 5.2 | 8.9 | 8.5 |
| Minorities | -67.9 | -31.8 | -28.0 | -28.0 | -28.0 |
| Core Net Profit | 382.5 | 453.9 | 470.9 | 485.8 | 520.7 |
Growth (%)
| Revenue | -1.6 | 32.2 | -20.1 | 5.3 | 5.7 |
| Gross Profit | 5.4 | 20.3 | -8.0 | 5.1 | 5.4 |
| Core Net Profit | 0.9 | 18.7 | 3.7 | 3.2 | 7.2 |
Source: Company, PublicInvest Research estimates
BALANCE SHEET DATA
| FYE Dec (RM m) | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Fixed assets | 531.9 | 775.8 | 843.4 | 907.0 | 954.6 |
| Other long-term assets | 2,826.5 | 3,499.2 | 3,499.6 | 3,499.6 | 3,499.6 |
| Cash at Bank | 508.6 | 268.3 | 624.8 | 905.7 | 1,235.6 |
| Other current assets | 641.3 | 578.0 | 439.5 | 462.8 | 489.0 |
| Total Assets | 4,508.3 | 5,121.3 | 5,407.2 | 5,775.2 | 6,178.9 |
| ST Borrowings | 435.2 | 615.5 | 615.5 | 615.5 | 615.5 |
| LT Borrowings | 466.1 | 530.9 | 480.9 | 430.9 | 380.9 |
| Payables | 169.4 | 215.1 | 146.3 | 154.1 | 162.8 |
| Other Liabilities | 213.6 | 215.3 | 215.3 | 215.3 | 215.3 |
| Total Liabilities | 1,284.3 | 1,576.8 | 1,458.0 | 1,415.8 | 1,374.5 |
| Shareholders’ Equity | 3,224.0 | 3,544.5 | 3,949.2 | 4,359.3 | 4,804.4 |
| Total Equity and Liabilities | 4,508.3 | 5,121.3 | 5,407.2 | 5,775.2 | 6,178.9 |
Source: Company, PublicInvest Research estimates
PER SHARE DATA & RATIOS
| FYE Dec | 2023A | 2024A | 2025F | 2026F | 2027F |
|---|---|---|---|---|---|
| Book Value Per Share | 3.4 | 3.8 | 4.2 | 4.6 | 5.1 |
| NTA Per Share | 3.4 | 3.7 | 4.1 | 4.6 | 5.0 |
| EPS (sen) | 40.6 | 48.2 | 50.0 | 51.5 | 55.3 |
| DPS (sen) | 8.3 | 9.0 | 10.0 | 11.0 | 11.0 |
| Payout Ratio (%) | 20.3 | 18.7 | 20.0 | 21.3 | 19.9 |
| ROA (%) | 10.0 | 9.6 | 9.2 | 8.9 | 8.9 |
| ROE (%) | 14.0 | 13.9 | 12.6 | 11.8 | 11.4 |
Source: Company, PublicInvest Research estimates
STOCKS
| OUTPERFORM | The stock return is expected to exceed a relevant benchmark’s total of 10% or higher over the next 12months. |
| NEUTRAL | The stock return is expected to be within +/- 10% of a relevant benchmark’s return over the next 12 months. |
| UNDERPERFORM | The stock return is expected to be below a relevant benchmark’s return by -10% over the next 12 months. |
| TRADING BUY | The stock return is expected to exceed a relevant benchmark’s return by 5% or higher over the next 3 months but the underlying fundamentals are not strong enough to warrant an Outperform call. |
| TRADING SELL | The stock return is expected to be below a relevant benchmark’s return by -5% or more over the next 3 months. |
| NOT RATED | The stock is not within regular research coverage. |
SECTOR
| OVERWEIGHT | The sector is expected to outperform a relevant benchmark over the next 12 months. |
| NEUTRAL | The sector is expected to perform in line with a relevant benchmark over the next 12 months. |
| UNDERWEIGHT | The sector is expected to underperform a relevant benchmark over the next 12 months. |
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