Post update, we are reiterating our OUTPERFORM call on SAMAIDEN, albeit with a higher TP of RM0.74 (from RM0.71) after embedding our ESG rating into our valuations. Overall, we came away from our update session feeling positive on the group’s sustained contract flows and job prospects, coupled with its regional expansion plans. Being a local solar EPCC player, the group is expected to continue to benefit from the high growth potential of RE in Malaysia.

We recently held a company meeting for some key updates, which was well attended. Below are some of our takeaways:

1. Current order book stands at RM358m, consisting of FY22 wins of RM340m – of which three are large scale solar (LSS) projects (cumulative contract value of RM163m and 40MW capacity), with the remainder being commercial and industrial (C&I) projects. We understand that the group is exploring and has the capacity of securing one additional bigger sized LSS project.

2. To benefit from partnership with Chudenko. Recap that Chudenko (Tokyo-listed, market cap USD922m) emerged as one of SAMAIDEN’s key shareholders at 15.15% earlier via private placements. SAMAIDEN is intending to leverage on this partnership to explore job opportunities from local Japanese businesses, although project size will still be relatively small at this juncture. Over the longer term, the partnership also has plans to explore other regional opportunities.

3. Eyeing overseas expansion. In the short term, SAMAIDEN is seeking to penetrate regionally into Vietnam, having just recently set-up a local office there, as well as into Indonesia, via its recent joint venture with Aneka Jaringan, which already has a presence there. Vietnam the second-largest electricity consumer in Southeast Asia is expected to become one of the top 10 countries globally with the highest solar energy capacity installed. Meanwhile, Indonesia accounts for 40% of the energy consumption in the region and is targeting to achieve 23% renewable energy (RE) capacity by 2025, from currently 12%.

Overall, we came away from the session feeling largely positive over the group’s sustained contract flows and new job prospects. Being a local centric solar PV EPCC player, the group will continue to benefit from the booming RE adoption in Malaysia, while its regional ventures may require some time to post meaningful earnings contribution. Post update, we kept our FY22-23E numbers unchanged, as we believe our investment thesis and assumptions are still largely intact.

Maintain OUTPERFORM. We raised our TP by 5% to RM0.74 (from RM0.71 previously), after embedding our 4-star ESG rating into our valuations, based on our stock ratings definition. Our ascribed valuation is derived from 15x PER on FY23 EPS, in-line with peer valuation. We like the company – both as growth and ESG play, given its exposure towards a high growth sector in the domestic RE industry, which is largely dominated by solar.

Risks to our call include: (i) slower-than-expected adoption of RE in Malaysia, (ii) project execution risks, which includes costs overrun and project delays, (iii) losing of market share to other solar EPCC players.

Source: Kenanga Research - 4 Aug 2022