SAMAIDEN has secured a RM181m EPCC contract in Kedah which almost doubled its outstanding order book to RM388m, keeping it busy for the next three years. We raise our FY24F net profit by 8%, lift our TP by 8% to RM1.24 (from RM1.15) and maintain our OUTPERFORM call.

SAMAIDEN has been awarded a RM188m EPCC contract in Kedah by a unit of UZMA (OP; TP: RM0.90). The project is a large-scale solar PV (LSSPV) power plant with a capacity of 50MWac under the LSS4 programme.

The latest job win has almost doubled its outstanding order book to RM388m which will keep it busy for the next three years. We estimate that the contract will fetch a gross profit margin of 10%-12%. LSS4 projects now make up about 60% of its order backlog of RM388m.

Meanwhile, its tender book stands at about RM1b at present with about half coming from LSS4 projects, with the balance about equally split between projects under the corporate green power programme (CGPP) and commercial/industrial projects.

Forecasts. We raise our FY24F net profit by 8% to reflect the higher order book.

We also raise our TP by 8% to RM1.24 (from RM1.15) based on 25x FY24F PER, in line with the average forward PER of its peers SVLEST (Not Rated) and SUNVIEW (Not Rated). Note that our TP reflects a 5% premium given its 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) the favourable policies and measures announced by the government recently including the lifting of RE export ban, electricity hikes and roll-out of the CGPP, (ii） its position as one of the top players in the local solar EPCC market, (iii) its ability to provide end-to-end solutions, including financing, and (iv) 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 - 12 Jul 2023