SAMAIDEN’s FY23 results met our forecast but topped market expectations. Its FY23 core net profit was flattish as its top line growth was offset by lower margins from Large-Scale Solar (LSS) projects. It is riding on a buoyant RE market locally. We maintain our FY24F earnings but lift our TP by 35% to RM1.67 (from RM1.24). Maintain OUTPERFORM.

Within expectation. Its FY23 core net profit met our forecast but beat the consensus estimate by 9%.

Results’ highlights. YoY, its FY23 revenue increased 13% mainly attributed to the significant work progression for EPCC jobs especially from LSS projects. However, its core net profit was flattish, weighed down by lower margins from LSS projects.

Outlook. We foresee >90% of the upcoming RE capacity (>31GW) in Malaysia to come from solar power (28GW) as it currently dominates the country’s RE sector. This projection is supported by the National Energy Transition Roadmap (NETR) as announced by the government recently which sets an ambitious target of RE to make up 31% of total power generation capacity by 2025, and 70% by 2050.

Also, businesses, driven by commercial reasons (i.e. to save cost) and ESG considerations, have voluntarily invested in solar energy generation assets following the recent hikes in electricity tariffs and as solar panel prices ease. This translates to new order books for solar EPCC contractors including SAMAIDEN.

Over the immediate term, it is poised to garner a slice of the action of an estimated RM2.4b EPCC jobs under the Corporate Green Power Programme (CGPP). Currently, its outstanding order book stands at RM373m (vs. RM246m three month ago) which will keep it busy for the next three years. Over the longer term, SAMAIDEN also aspires to become an owner of RE assets, in addition to being an EPCC contractor.

Forecasts. We maintain our FY24F earnings and introduce our FY25F numbers.

However, we raise our TP by 35% to RM1.67 (from RM1.24) as we adjust our valuation basis to 30x FY25F PER (from 25x FY24F PER previously) as we: (i) roll forward our valuation base year, and (ii) reflect the updated average historical forward PER of is peers, i.e. SVLEST and SUNVIEW (which rises to 30x from 25x). Our TP also reflects an unchanged 5% premium given its 4-star ESG rating as appraised by us (see page 4).

We continue to like SAMAIDEN for: (i) the bright outlook of the RE market in Malaysia; (ii) its strong market position, being the second largest solar EPCC contractor locally, (iii) its ability to provide end-toend services, including financing, (iv) its strong execution track record and (v) its strong earnings visibility backed by a sizeable outstanding order book. Maintain OUTPERFORM.

Risks to our call include: (i) the government dials back on its RE policy, (ii) project cost overrun and liabilities arising from liquidated ascertained damages (LAD), and (iii) escalating cost of inputs, particularly, solar panel and labour.

Source: Kenanga Research - 1 Sept 2023