KUALA LUMPUR (Dec 12): Kenanga Research has initiated coverage of Solarvest Holdings Bhd with an “outperform” rating at RM1.23, and a target price (TP) of RM1.47, and said that prospects for the renewable energy (RE) sector in Malaysia are strong, backed by the government’s commitment towards RE making up 70% of the generation capacity mix by 2050.

In a note on Tuesday, the research house said Solarvest is also building a portfolio of solar photovoltaic assets for recurring income.

“Backed by strong fundamentals, we project earnings growth of 53% for the financial year ended March 31, 2023 (FY2023) and 67% for FY2024, driven by: i) an outstanding engineering, procurement, construction and commissioning (EPCC) order book of RM289 million (that will keep it busy for two years) and a tender book amounting to 3.1GWp (Malaysia: 52%; regional: 48%); ii) asset ownership under the Large Scale Solar 4 or LSS4 (67.3MWp) and Powervest programmes (88MWp); and iii) EPCC project opportunities amounting to at least 250MWp through the Corporate Green Power Programme.

“We derive a TP of RM1.47 for Solarvest, based on sum-of-parts valuation, valuing its EPCC segment at 30 times FY2025 price-earnings ratio (PER), in line with the average historical one-year forward PER of the solar EPCC sector, and its LSS4 and Powervest assets by discounted cash flow.

“Note that our TP reflects a 5% premium given a four-star ESG (environmental, social and governance) rating as appraised by us,” the research house said.

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