KEY INVESTMENT HIGHLIGHTS

• Enters into 10-year PPA with Sun Investments in Maldives
• To build, operate and maintain a solar PV system with a DC capacity of 1,727kWp and a 1,398kWh BESS
• Contract value estimated to be USD6.9m (RM29.8m)
• Maintain BUY with an unchanged TP of RM1.32

PPA in Maldives. Pekat Group Berhad (Pekat), through its wholly-owned subsidiary Solaroo RE (Maldives) Pvt Ltd, has entered into a 10-year power purchase agreement (PPA) to supply solar PV energy to Sun Investments Pvt Ltd in Maldives.

Details of the PPA. Solaroo will design, construct, install, own, operate and maintain a solar PV energy generating system with a DC capacity of 1,727kWp and a battery energy storage system (BESS) capacity of 1,398 kWh on a site at Sun Siyam Vilu Reef Maldives. The contract value is estimated to be USD6.9m or about RM29.8m, based on the generation of approximately 25.45 million kWh of electricity over the 10-year period.

The PPA is expected to commence within 12 months from the date of possession from the site. We expect this to generate a healthy recurring income for Pekat throughout the 10-year period.

Earnings estimates. We keep our earnings estimates unchanged until there is further clarity on the timeline of the commencement of the PPA.

Target price. We also maintain our TP at RM1.32, pegging its FY25F EPS of 4.7 sen to a forward PER of 28x, based on its three-year historical mean.

Maintain BUY. We reiterate our BUY recommendation on Pekat, given its consistent quarterly performance, and bright prospects with favourable policies such as the CGPP, National Energy Transition Roadmap (NETR) and the LSS5. Its outstanding order book remains healthy at RM206.8m, which we expect to grow to about RM320m by the year end with CGPP EPCC projects. We are also optimistic about the group's proposed acquisition of 60% of Apex Power, which will give it control over EPE Switchgear, allowing it to expand its business into power distribution equipment and to tap into new foreign markets, which is expected to strengthen its bottom line significantly starting FY25.

Source: MIDF Research - 3 Sep 2024