Kawan Renergy Bhd managing director Lim Thou Lai: The company is confident that renewable energy and clean energy would gradually become the “biggest income” for the group, while still maintaining strong performance in its engineering segments. (Photo by Shahrill Basri/The Edge)

KUALA LUMPUR (May 29): Kawan Renergy Bhd (KL:KENERGY), an engineering service company, aims to leverage renewable energy and cogeneration plants to boost its earnings growth, supported by its mainstream business segment.

Kawan Renergy’s managing director Lim Thou Lai, who spoke at the company’s listing ceremony on the ACE Market of Bursa Malaysia on Wednesday, said it is confident that renewable energy and clean energy would gradually become the “biggest income” for the group, while still maintaining strong performance in its engineering segments.

“For this year alone, we look forward to achieve at least [a] double digit growth [or that] above RM100 million,” said Lim. Despite the dynamic nature of the business, which makes it challenging to forecast, the group remains confident in reaching its earnings target, he noted.

Kawan Renergy ended their first day of trading on the ACE Market on Wednesday at 46.5 sen each for a 55% gain over the initial public offering (IPO) price of 30 sen.

The counter opened at 45 sen and rose as much as 61.67% to 48.5 sen. At the closing price of 46.5 sen, the company is valued at RM255.75 million. A total of 148.54 million shares changed hands in the maiden day trading.

Kawan Renergy raised RM33 million from the IPO, which was oversubscribed by 94.99 times

In FY2023, the renewable energy segment contributed approximately 22% of the group’s revenue, while industrial processes and equipment were the primary revenue drivers, accounting for 49% of total revenue.

The group has allocated a total of RM5 million (15.1%) from the initial public offering (IPO) proceeds to construct a new two-megawatt (2MW) biomass power plant, with RM2.5 million (7.6%) earmarked to improve the production output of the Bercham plant, a landfill biogas power plant located in Perak, while RM500,000 will be used for the purchase of additional machinery to upgrade the company’s production processes.

Notably, its venture into the power generation and sale of electricity business only began contributing to revenue in FY2022, following the acquisition of Magenko Group in August 2022. Although its contribution was minimal at RM41,000 (less than 0.1% of total revenue for FY2022), revenue for this segment increased to RM182,000 (0.2% of total revenue) in FY2023.

The “design, fabrication, installation, and/or commissioning solutions” still constitute the entire revenue for Kawan Renergy from FY2020 to FY2023.

Asked on its expansion plans into other countries, Lim indicated that the group “is not in a hurry to go overseas, as they are already busy with domestic operations”. Lim, however, said that the group does have long-term plans to expand regionally, focusing on Indonesia and its surrounding countries, particularly in the renewable energy and engineering sectors.

Lim also said that Kawan Renergy does not foresee any significant challenges in the near term regarding getting raw materials, despite the recent spike in certain commodities prices, noting that the fluctuations are a usual occurrence.

“For this electrical engineering, when we do EPCC (engineering, procurement, construction and commissioning), we actually outsource the job to our contractors,” Lim said. So, any rise in material (prices) does not really affect the company, he noted.