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Global Clean Energy Trends Will Power Southeast Asia Renewables

Published
24 Aug 25
Updated
28 Aug 25
AnalystHighTarget's Fair Value
RM 5.80
39.7% undervalued intrinsic discount
28 Aug
RM 3.50
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1Y
-21.5%
7D
-1.7%

Author's Valuation

RM 5.8

39.7% undervalued intrinsic discount

AnalystHighTarget Fair Value

Key Takeaways

  • Long-term concession benefits, low capex, and strong cash discipline set the stage for accelerating free cash flow, margin expansion, and regional project leadership.
  • Diversified operations and early grid modernization moves uniquely position the company to capture Southeast Asian energy growth and capitalize on sustainable investing trends.
  • Reliance on hydropower, intense competition, limited diversification, currency risks, and early-stage ventures constrain profitability and heighten exposure to market and operational pressures.

Catalysts

About Mega First Corporation Berhad
    Engages in renewable energy, resources, and packaging businesses in Malaysia, Lao PDR, other ASEAN countries, Papua New Guinea, India, Bangladesh, Australia, New Zealand, and internationally.
What are the underlying business or industry changes driving this perspective?
  • While analysts broadly agree the Don Sahong concession extension and water rights acquisition will drive margin and profit, they likely underappreciate the full impact of a 25-year horizon with substantially lower royalties and near-zero ongoing capex, setting the stage for Mega First to generate unprecedented, compounding free cash flow that could drive a rerating of valuation multiples.
  • The consensus highlights the reduction in receivable and forex risk, but a more bullish view is that Mega First's increasingly robust balance sheet and cash discipline not only lower earnings volatility but also strategically position the company to swiftly secure and scale new projects ahead of regional peers, transforming today's financial stability into tomorrow's accelerated RE expansion and profit growth.
  • Mega First is poised to harness long-term surges in Southeast Asian energy demand, with its proven ability to deliver complex hydro, solar, and battery storage projects enabling compound growth in installed capacity and revenue even before mandatory regional decarbonization deadlines accelerate new project auctions.
  • The company's early-mover advantage in battery energy storage and deep partnerships with leading Chinese technology providers uniquely position Mega First to lead Malaysia's grid modernization, unlocking recurring, utility-like contracted cash flows and setting a platform for rapid market share capture as Southeast Asia's flexible grid infrastructure requirements balloon.
  • The group's disciplined capital buildup and diversified category exposure-spanning renewables, packaging, resources, and food security-create not just resilience but significant optionality to deploy capital nimbly into high-ROIC opportunities, fueling both margin expansion and long-term earnings upside as ESG and sustainable investing trends drive higher industry multiples.

Mega First Corporation Berhad Earnings and Revenue Growth

Mega First Corporation Berhad Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more optimistic perspective on Mega First Corporation Berhad compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
  • The bullish analysts are assuming Mega First Corporation Berhad's revenue will decrease by 4.8% annually over the next 3 years.
  • The bullish analysts assume that profit margins will increase from 22.8% today to 34.3% in 3 years time.
  • The bullish analysts expect earnings to reach MYR 526.8 million (and earnings per share of MYR 0.56) by about August 2028, up from MYR 405.9 million today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.7x on those 2028 earnings, up from 8.1x today. This future PE is greater than the current PE for the MY Renewable Energy industry at 8.2x.
  • Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 9.72%, as per the Simply Wall St company report.

Mega First Corporation Berhad Future Earnings Per Share Growth

Mega First Corporation Berhad Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Mega First remains heavily reliant on the Don Sahong hydropower project in Laos, and recent changes to its power purchase agreement have resulted in a roughly five percent year-on-year tariff reduction, which may put sustained pressure on revenue and net margins over the life of the extended concession if electricity prices or regional demand falter.
  • The company's diversification into solar and battery energy storage is still at an early stage, and low returns in highly competitive tenders-expected single digit project IRR, sometimes below eight percent-could weigh on future earnings growth, particularly as competition in renewables intensifies and cost advantages erode.
  • Rising competition and pricing pressure, especially from China, continue to negatively impact Mega First's Resources (lime) and Packaging divisions, leading to significant declines in profit before tax and squeezing net margins, with no clear path to structural recovery or unique differentiators to offset overcapacity or low-cost imports.
  • Exposure to currency volatility, particularly the ringgit-US dollar exchange rate, is creating substantial foreign exchange losses that affect group profit after tax, and there is limited evidence the company can mitigate this risk meaningfully as long as it is export-dependent and holds material non-ringgit assets and receivables.
  • The company's push into new sectors such as food security and agriculture is in its infancy, with recent losses and uncertain yield or market dynamics, while slow progress in scaling these new ventures relative to hydropower exacerbates concentration risk and limits future revenue diversification.

Valuation

How have all the factors above been brought together to estimate a fair value?

  • The assumed bullish price target for Mega First Corporation Berhad is MYR5.8, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mega First Corporation Berhad's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  • However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of MYR5.8, and the most bearish reporting a price target of just MYR3.68.
  • In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be MYR1.5 billion, earnings will come to MYR526.8 million, and it would be trading on a PE ratio of 13.7x, assuming you use a discount rate of 9.7%.
  • Given the current share price of MYR3.5, the bullish analyst price target of MYR5.8 is 39.7% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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