SAMAIDEN guided for bumper earnings in 3QFY24 driven by accelerated progress billings from EPCC jobs for Large-Scale Solar 4 (LSS4) projects. Its current tender book and order backlog stand at RM1.2b and RM351m, respectively. We maintain our forecasts, TP of RM1.44 and OUTPERFORM call.

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

1. SAMAIDEN is unperturbed by a soft 1QFY24. It is looking forward to bumper quarters ahead, especially in 3QFY24, driven by accelerated progress billings from EPCC jobs for LSS4 projects.

2. SAMAIDEN’s current tender book stand at RM1.2b comprising EPCC jobs for LSS4/Corporate Green Power Programme (CGPP) projects (~c.40%), rooftop solar for the commercial and industrial segments (~c.30%) and stand-alone/off-grid solar power systems (~c.30%). Historically, its success rate was 10%-20%. Meanwhile, its outstanding order book stands at RM351m comprising EPCC jobs for LSS4 projects (60%), bioenergy projects (25%) and rooftop solar projects (15%), which can keep it busy for at least over the next 18 months.

3. We understand that SAMAIDEN has locked in solar panels at 12-13 US cents/W, vs. the current spot price of 19.6 US cents/W. We understand that SAMAIDEN is able to negotiate for a better price with its suppliers via bulk purchases.

4. In terms of its investment in solar assets, to recap, SAMAIDEN has recently won the rights under the CGPP to develop 13.42 MWac of generation capacity on its own and 29.9 MWac via a consortium where it holds a minority stake. These two projects alone will generate EPCC works worth about RM130m to SAMAIDEN based on our estimates.

Forecasts. Maintained.

Consequently, we maintain our TP of RM1.44 based on 30x fully-diluted FY25F EPS of 4.8 sen, in line with the average forward PER of peers such as SVLEST (Not Rated) and SUNVIEW (Not Rated). Our TP imputes a 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 sector in Malaysia, underpinned by the government’s goal of RE making up 70% of total generation mix by 2050, (ii) the increased commercial viability of solar power projects on falling solar panel prices and the export potential of RE, (iii) its position as one of the top players in the local solar EPCC market, (iv) its ability to provide end-to-end solutions, including financing, and (v) 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 - 1 Dec 2023