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PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 21 Apr 2021, 10:46 AM

 

Uzma Berhad - Eyeing for LSS4

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Uzma has entered into a conditional share sale agreement with Mr. Mohd Syahrul Nizar for the acquisition of 49% stake in Suria Infiniti Sdn Bhd and 100% stake in Mahendran Surya Innovations Sdn Bhd for a cash consideration of RM5.4m. We are positive over this development as it helps the Group to capitalize on the opportunities within the solar value chain, including net energy metering, large scale solar projects and other service within the renewable energy market. This move is also part of its efforts in realising its 5-year plan to broaden its earnings base by building a healthy revenue mix. No change to our FY21-23 earnings forecast as we see the financial contribution to Uzma’s are currently negligible, whilst pending further details by the management and outcome from the existing tendering project. Our TP of RM0.84 is maintained based on 10x PER over FY22 EPS of 8.4sen. Outperform rating is affirmed.

  • Suria Infiniti (SI) is a Solar Engineering Procurement Construction and Commissioning contractor and among the first batch of grid-tied solar power installation providers that has obtained the certification from Sustainable Energy Development Authority, Institute for Sustainable Power Quality and Grid-Connected Solar Photovoltaic in Malaysia. Since then, it has taken steps to become a solar turnkey EPCC service provider and shaped an established track record of Large-Scale Solar PV projects as well as residential, commercial, and industrial properties projects. To date, it has installed over 20MW solar power under its belt and in the midst of bidding for LSS4 projects. SI reported RM0.145m and RM0.124m net profit in FY17 and FY18 while a net loss of RM0.152m in FY19.
  • Mahendran Surya Innovations (MSI) is a service provider for renewable energy, especially solar energy and currently owns and operated a 0.42MWp roof top solar farm in Sungai Buloh, Selangor. It recorded a loss of RM14,000 in FY17 while RM86,000 and RM24,000 profit in FY18 and FY19 respectively.
  • Our view. While there is no further guidance or target provided by the management at this juncture, we are positive over this development nonetheless as it should enable Uzma to capitalise the vast solar and renewable opportunities in Malaysia. This includes the 1,000MW of total solar capacity worth approx. RM3.5bn in EPCC segment, or better known as Large Scale Solar 4 (LSS4). There are two packages offered in LSS4 i.e. i) 500MW for capacity 10MW - 30MW, and ii) another 500MW for capacity 30MW - 50MW. It is understood that each developer can make a maximum of only three bids.

Given LSS4 being the largest capacity offered under Energy Commission’s Large-Scale Solar scheme thus far coupled with two packages offered, we think this could give opportunities to many industry players to participate in the bidding process. It is anticipating that more winners to be announced which may also include small industry players. With just 10MW, it is expected to generate RM2.8m profit (RM1.4m to Uzma) based on closest peers’ net profit margin of 8%. Meanwhile, it is expected to generate RM8.4m (RM4.1m to Uzma) and RM14m (RM6.9m to Uzma) should SI win up to 30MW and 50MW in the tender. The awards are expected to take place anytime soon and to be commissioned by end-2023.

  • Gearing to stay manageable. The acquisition price of RM5.4m is expected to be funded by internal generated funds through two instalments. We think this would not be an issue given its available cash balance of RM159m as of 2QFY21, maintaining its net gearing level at c.0.87x.

Source: PublicInvest Research - 2 Mar 2021

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