MLK: Operational Setbacks at Power Complex Following Coal Unloader Collapse

Malakoff Corporation recently convened an analyst briefing to address the collapse of a coal unloader at its Tanjung Bin Complex in Johor. The incident, which occurred last Saturday, tragically resulted in two fatalities. Authorities have cordoned off the affected area, with the Department of Occupational Safety and Health (DOSH) currently conducting an investigation expected to conclude within a week.

Incident Overview and Immediate Impact

The collapse caused significant damage to all three conveyor belts responsible for transporting coal from the jetty to the storage yard, which collectively have a capacity of 10,000 tonnes per hour. While the full extent of repair costs remains unknown, Malakoff has indicated that Line C, the largest conveyor belt with a 5,000 tonnes per hour capacity, sustained the least damage. Plans are underway to prioritise its repair once DOSH lifts its site prohibition notice.

Operational Continuity and Mitigation Efforts

Currently, the Tanjung Bin Energy (TBE) and Tanjung Bin Power (TBP) plants hold coal inventories sufficient for 35 and 40 days of operation, respectively. However, sustained operations hinge on timely conveyor belt repairs. To mitigate potential disruptions, Malakoff is exploring the use of barges to transport coal from the jetty to the coal storage yard and is actively seeking suppliers and contractors for the repair works. On a brighter note, TBE’s operations are projected to resume next month, with repairs to its flue system and chimney, damaged in a separate incident last October, anticipated to be completed by month-end. TBE and TBP are crucial earnings contributors, providing annual capacity payments of RM640 million and nearly RM1 billion, respectively, and together accounted for 86% of Malakoff’s FY24 capacity payments.

Analyst Perspective and Future Outlook

AmInvestment Bank has maintained its HOLD recommendation on the company, reiterating a target price of RM0.88 per share. This valuation is based on a FY26F price-to-earnings ratio of 14x, aligning with the group’s five-year average. Despite acknowledging long-term earnings risks associated with the expiry of Power Purchase Agreements for various plants—including Prai (August 2025), Segari (end FY27F), and Tanjung Bin (FY31F)—and the potential for capacity payment losses from forced outages, the bank notes Malakoff’s decent dividend yield, exceeding 6%. The current FY26F net profit forecast remains unchanged, as the company possesses a month’s worth of coal inventory to sustain power plant operations.