SAMAIDEN’s 1HFY24 results met expectations. Its 1HFY24 core net profit grew 22% YoY, driven by strong progress billings from its LSS EPCC jobs. The recently unveiled LSS5 and Net Energy Metering (NEM) initiatives will ensure a healthy pipeline for solar EPCC players including SAMAIDEN. We maintain our forecasts, TP of RM1.51 and OUTPERFORM call.

Stronger quarters ahead. Its 1HFY24 core net profit of RM6m came in at only 37% and 29% of our full-year forecast and full-year consensus estimate, respectively. However, we deem the results within expectation as we expect a strong 2H backed by the delivery of the RM188m EPCC job for the 50MW LSS4 project of UZMA (OP; TP: RM1.45).

Results’ highlights. YoY, its 1HFY24 revenue jumped 17% driven by strong progress billings from its LSS EPCC jobs. Its core net profit rose by a steeper 22% thanks to lower solar panel prices that more than made up for the inherently low margins of LSS projects.

QoQ, similarly, its 2QFY24 core net profit increased by 7% driven by strong progress billings of LSS EPCC jobs.

Outlook. The prospects of the solar energy sector are well-supported by the National Energy Transition Roadmap (NETR) which sets an ambitious target of RE to make up 70% of total power generation capacity by 2050. In line with the roadmap, the Energy Commission is embarking on LSS5 with a quota of 2GW and a developer is now allowed to bid for up to 500MW (vs. only 50MW previously). This initiative alone, will translate to a pipeline for solar EPCC players worth as much as RM5b based on our estimates, which will keep the sector busy until 2028.

Also, an additional quota of 400MW under the NEM initiative from Feb to Dec 2024 will continue to facilitate investment by businesses in solar energy generation assets. Recall, businesses in general, 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.

Currently, SAMAIDEN’s outstanding order book stands at RM358m, which will keep it busy for at least over the next 18 months.

Forecasts. Maintained.

Valuations. We also maintain our TP of RM1.51 based on SoP valuation, valuing its EPCC segment at 30x fully-diluted FY25F EPS of 4.9 sen, in line with the average forward PER of peers such as SVLEST (Not Rated) and SUNVIEW (Not Rated) and DCF for its CGPP and biomass assets. Our TP imputes a 5% premium given its 4-star ESG rating as appraised by us (see page 4).

Investment case. 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 endto-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 - 22 Feb 2024