• Solarvest is the market leader in solar EPCC projects in Malaysia with a track record of 1.1GWp of solar PV system installed. For the next phase of growth, the company intends to expand its EPCC services into foreign market with a total tender book of 1.5GWp.

• Additionally, Solarvest is developing recurring income streams from Power Purchase Agreement (PPA) assets, derived from (i) the roll-out of various government programs such as LSS and CGPP, and (ii) its proprietary financing solution to commercial and industrial (C&I) clients. To-date, it has circa 160MWp of solar PPA assets which is expected to generate recurring income of c.RM20mn p.a. beginning FY25-26F.

• The company currently holds a remaining EPCC order book of RM289mn. In the near term, it aims to secure 443.4MWp of CGPP projects, expected to be worth RM1.1bn, to replenish its orderbook.

• The stock price is currently trading at 30.7x forward PER which is below its 4-year average PER of 46x. We think it deserved to be trading at high PER due to growing PPA asset portfolio and potential market expansion to overseas.

One Stop Centre Provider for Solar Energy

Solarvest was established in 2012 and listed on Ace market since 2019. The group serves as a turkey solar engineering, procurement, construction and commissioning (EPCC) player, as well as operation and maintenance (O&M) provider covering large scale solar (LSS) farm, and rooftop solar (commercial and industrial properties and residential segment). Apart from that, it also provides solar financing programme named Powervest to accommodate client’s financial needs in solar PV system project investment and established Powerbee Sdn Bhd to focus on green mobility ecosystem development.

Proven Track Record with Market Leadership Position

To date, Solarvest has installed more than 1.1GWp of solar PV system from the utility scale and rooftop solar segment. This put the company as a market leader in terms of market share in solar EPCC project.

Integration of Solar Financing Solution

Powervest is divided into two division, i) Powerflex: C&I clients will have flexibility to own solar PV system and will pay off the adoption through a fixed monthly repayment, and ii) Powerlease: a form of long-term lease agreement between Solarvest and offtaker to installs, operates, and maintains solar PV system at the premise of the offtaker. In return, offtaker will purchase electricity from the system at an agreed tariff for 15-25 years of PPAs tenure. Interestingly, offtaker do not have to pay any upfront cost. As management guided, Powervest’s recurring revenue could contribute up to RM39mn per annum upon project completion.

Building Portfolio of Solar PPA Asset for Recurring Income

Leveraging its EPCC capability, the company owns assets totaling 67.3MWp from LSS4 and 43.5MWp from the Corporate Green Power Programme (CGPP). To date, two projects, developed in Manjung, Perak, and Kuala Selangor, achieved their Commercial Operation Date (COD) in August and November 2023, respectively. Meanwhile, the remaining LSS4 project, located in Manjung, Perak (~17.2MWp), is expected to be commissioned by FY24. All these projects are forecasted to contribute RM24mn and RM9mn annually in revenue and earnings, respectively, for 25 years (assuming full-year recognition from FY25).

Apart from that, Solarvest has secured a total of 123MWp as a Solar Power Producer (SPP) under the Corporate Green Power Programme (CGPP) in 2023, with an effective ownership of 43.5MWp. The solar plants under CGPP are expected to commence operations by the end of 2025 and will be tied to Virtual Power Purchase Agreements (VPPA) for a duration of 20 to 21 years. Solarvest will be responsible for both the EPCC as well as the O&M services for these CGPP assets. On a positive note, CGPP offers a higher tariff ranging between 25- 28sen/kWh, compared to LSS4 at 22-23sen/kWh.

Pursuing Growth via Market Expansion

Given its market leadership position in Malaysia, the company is working towards penetrating foreign market as part of its growth strategy. As of Nov 2023, Solarvest outstanding tender book stood at cumulative of 3.1GWp (Malaysia: 1.6GWp and Overseas: 1.5GWp). To-date, its track record in foreign market is still nascent with only 23.5MWp of solar projects secured overseas.

Sanguine Outlook

As of Sep 2023, Solarvest’s EPCC orderbook stood at RM289mn, comprising (i) LSS4 orderbook of RM75mn and (ii) residential and C&I orderbook of RM214mn. At the current rate, this order book can only sustain operations for less than a year. However, the company's outlook is optimistic, anchored by the potential replenishment of the order book with 443.4MWp of CGPP projects, amounting to circa RM1.1bn. Additionally, there is an expected quarterly order book replenishment of RM50mn in the C&I segment.

At the bottom line, the company expects to realise recurring income of c.RM20mn p.a. from its PPA assets (i.e. Powervest and LSS4) beginning FY25-26F. Its EPCC business may also benefit from favourable solar panel price trend in near term which has dropped to record low since early 2023 due to abundant of supply.

Source: BIMB Securities Research - 22 Jan 2024