Investment Highlights

• We maintain forecasts but raise our fair value by 33% to RM7.96/share (from RM5.97/share previously) for KPower based on 20x FY21F EPS (from 15x). Since our coverage initiation on 4 Nov 2020, KPower’s market value has more than doubled from RM370mil to RM873mil at present, making it a lot more investible to large institutional investors. This has prompted us to remove the 5x multiple discount to the 20x forward PE of leading renewable energy players globally. Maintain BUY.

• KPower made two announcements overnight, namely:

1) It is acquiring a 70% stake in Granulab (M) Sdn Bhd for RM1.0mil from Sirim. Granulab is principally involved in the business of medical device manufacturing.

2) It has secured a job worth US$6.0mil (equivalent to approximately RM24.0mil) for the supply of polymerase chain reaction (PCR) reagent kit, or more widely known as Covid-19 test kits over 12 months.

• The latest developments marked KPower’s small steps into the healthcare business. We are not expecting any material contributions from these new businesses over the short term.

• We continue to like KPower for: (1) the bright prospects of renewable energy, underpinned by the global trends towards clean and sustainable energy and carbon neutrality to combat climate change; (2) its strong earnings visibility and growth potential underpinned by its RM1.6bil order backlog on green utility projects, coupled with a massive tender book of RM3.2bil; and (3) it being a strong contender for EPCC packages under the 1 gigawatt 4th cycle of the large-scale solar (LSS4) project locally

Source: AmInvest Research - 6 Jan 2021