• Maintain BUY (TP: RM0.38). Reservoir Link Energy (RL) 1QFY24 core PATAMI of RM1.4mn made up only 13% and 14% of both our and consensus estimate respectively. However, we deem this as within our estimate on expectation of stronger earnings in coming quarters. 1QFY24 core earnings grew 42% QoQ underpinned by solar segment that recorded highest quarterly revenue at RM49mn. While O&G revenue also continued to improve, earnings from well perforation services remained subdued at RM3.4mn, dragging overall GP margin for the segment. Overall, we still think that the stock offers relatively cheaper exposure to encouraging demand for solar project. Hence, maintain RL as a BUY with an unchanged TP of RM0.38.

• Key highlights. Revenue grew 31% QoQ and 63% YoY to RM68mn due to further recovery in O&G segment as well as stronger activity in solar segment. Notably, RL’s Founder Energy recorded highest ever revenue at RM49mn aided by the commencement of new solar installation project at Kuala Muda Kedah (subcontracted by Samaiden for Uzma LSS4 project). However, GP rose only marginally by 2.2% QoQ to RM5.4mn as it incurred higher cost during commencement of the project. On O&G segment, there was broadbase recovery in well services excluding high margin well perforation service which dragged the segment GP margin.

• Earnings Revision. No change to our forecast.

• Outlook. RL orderbook still on downtrend at RM175mn (6Q23: RM192.5mn) amidst lack of new project. However, we remain optimistic the company will able to replenish its orderbook in anticipation of the roll-out of Corporate Green Power Programme projects in 2024. The company also recently acquired new rooftop solar asset with capacity of 2.5MW and remaining PPA period of 20 years for RM10.5mn. This is expected to contribute to annual revenue and PAT of RM1.2mn of RM300k respectively upon completion of transaction expected by end 2023.

Source: BIMB Securities Research - 17 Nov 2023