Investment Highlights

• We maintain our HOLD recommendation, net profit forecasts and fair value (FV) of RM2.57 based on 20x FY23F EPS, in line with the valuations of leading renewable energy players globally.

• KPower has secured a US$12.0mil (RM48.6mil) contract for the supply of airbag/breathing bag for GeNose and GeNose Covid-19 test kits over the next 12 months. This is on the heel of the award of a RM24.0mil contract for the supply of polymerase chain reaction (PCR) kit (more widely known as Covid-19 test kits) last month. While these developments show that KPower is slowly gaining a foothold in the healthcare segment, the contribution from the new business will remain insignificant during our forecast period and hence we are keeping our forecasts.

• We are more encouraged by KPower having bagged new renewable energy EPCC contracts of RM543.3mil YTD in FY21F (June), boosting its outstanding construction order book to RM1.6bil. We maintain our assumption for construction job wins of RM1.4bil annually in FY21F to FY23F (which is a tad more conservative against KPower’s guidance for RM2bil for FY21F).

• 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.

• However, at current valuations of 21x FY23F earnings, we believe its upside is capped

Source: AmInvest Research - 17 Feb 2021