Kenanga Research & Investment

Samaiden Group - Sunny with Only a Slim Chance of Rain

Publish date: Mon, 29 May 2023, 03:01 PM

SAMAIDEN’s tender book stands at RM1.3b at present, with about half coming from LSS4 projects. Historically, its success rate was  10-20%. Meanwhile, its order backlog of RM246m should keep it busy over the next three years. We maintain our forecasts, TP of  RM1.15 and OUTPERFORM call.

We came away from SAMAIDEN’s post-results briefing feeling positive.  The key takeaways are as follows:

  1. SAMAIDEN’S 9MFY23 results were not as weak as the headline numbers suggested. This was because the results included about  RM2m one-off professional fee and listing expenses for the transfer of its listing to the Main Market from the ACE Market. Excluding these non-operational items, core net profit of 9MFY23 would hold up YoY (+1%).
  2. Its current has a tender book of RM1.3b, largely coming from LSS4  projects (~c.50%), Corporate Green Power Programme (~c.25%)  as well as commercial and industrial projects (~c.25%). Historically,  its success rate was 10-20%. At present, its order backlog stands  at RM246m (24% from LSS), which will keep it busy for the next  three years.
  3. SAMAIDEN shared that, based on its research, the global weighted average levelised cost of electricity (LCOE) of solar PV  commissioned in 2021 fell 13% YoY from USD 0.055/kWh to USD  0.048/kWh. Also, according to International Renewable Energy  Agency (IRENA), over the course of a decade, i.e. between 2010  and 2020, the global average cost of solar PV systems plunged by approximately 80%. Falling cost of solar PV systems (and rising  cost of fossil fuels) will make solar-based renewable energy even more viable going forward.

Forecasts. Maintained

We also maintain our TP of RM1.15 based on 25x FY24F PER, in-line with the average forward PER of its peers SVLEST and SUNVIEW.  Note that our TP reflects a 5% premium given a 4-star ESG rating as appraised by us (see page 4).

Outlook. The prospects of the RE sector, including solar-based energy,  are bright underpinned by: (i) Malaysia’s target of RE making up 31% of total power generation capacity by 2025, and 70% by 2050, and (ii) the  recent lifting of energy export ban.

Investment thesis. We like SAMAIDEN for: (i) being one of the top players in the local solar EPCC market, (ii) its ability to provide end-to-end solutions, including financing, and (iii) its proven track record in delivering projects on time and within budget. Maintain OUTPERFORM.

Risks to our call include: (i) the government dials back on RE policy,  (ii) influx of new players in the EPCC space, intensifying competition, (iii)  project execution risks including cost overrun and project delays, and  (iv) escalating cost of inputs, particularly, solar panel and labour.

Source: Kenanga Research - 29 May 2023

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