​​Financial Highlights

The following table sets out the key financial highlight base on the historical audited combined financial statements for the Financial Years Under Review:

• The revenue increased from RM 5.6 mil (FYE 2019) to RM 99.2 mil (FYE 2021). The company has a huge increase in its market share.
• The gross profit margin reaches 20.50% in FYE 2022, which is the lowest GPM within the last 4 years due to the increase in project-related expenses. (Generally, a GP margin of 20% is considered high/ good).
• PAT margin decreased from 13.36% (FYE 2021) to 8.95% (FYE 2022).
• The gearing ratio is 0.97 (FYE 2022) which is considered an unhealthy range (A good gearing ratio should be between 0.25 – 0.5).

Major customer and Supplier 

Major Customers

The top 5 major customers for the FYE Under Review are as follows:

According to the details, the top 5 customers are around 52%. The top 3 customers are around 37.81% of total revenue. The company might be involved in the risk of concentrating on customers; the top customer contributes the majority of the revenue of the company. We also realize that the length of the business relationship of the top 5 clients is not over 2 years, this will also increase the risk of concentrating on customers.

Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 54%. The company mentioned that they are not dependent on any single supplier of products or services as similar purchases can be sourced from other suppliers. Therefore, they will not be involved in the switching cost risk in the future.

Industry Overview

According to research from Vital Factor Consulting, the performance of the solar PV industry in Malaysia is driven by government initiatives and policies such as the introduction of various solar PV programs, tax incentives, rural electrification programs, and policies to increase the use of renewable energy. In 2021, the Ministry of Energy and Natural Resources Introduced the Energy Transition Plan 2021 - 2040 with a target to increase the share of renewable energy in the total installed capacity in Malaysia to 31% in 2025 and 40% in 2035. In 2021, renewable sources including large hydro accounted for approximately 23.0% of the power generation capacity mix in Malaysia. (Source: Energy Commission Malaysia)

The renewable energy installed capacity in peninsular Malaysia is projected to increase from 4,430 MW in 2021 to 10,944 MW by 2035. The plan for an energy transition towards renewable energy will mainly be driven by solar PV energy with the focus being Peninsular Malaysia. In addition, over 7,000 MW of coal plants are expected to be replaced with gas and renewable energy resources upon the expiration of their respective PPA by 2033.

The solar PV industry is affected by shortages of crystalline silicon, the raw material for the manufacture of solar cells. The storage of crystalline silicon faced by the solar PV industry has resulted in increases in solar PV module prices as well as caused some delays in implementing solar PV projects. In this respect, a sustained shortage of crystalline silicon for the production of solar cells may impact the solar PV industry in Malaysia.

The components of a solar PV facility such as solar PV modules are mainly manufactured and imported from foreign countries and are subjected to the fluctuation of the sea freight rate. The sea freight rates have been on an increasing trend since the second half of 2020 from US$2,032/forty-foot equivalent unit (FEU) on 2 July 2020 to US$10,377/FEU on 23 September 2021, and subsequently, decreased to US$6,224/FEU on 18 August 2022. The increase in sea freight rates was mainly due to the imbalance between demand and supply of containers resulting from the COVID-19 conditions in different economies as well as the imbalance in trade between China and the US where China exports more than it imports, thereby creating an insufficient supply of empty containers for China export requirements. The increase in sea freight is likely to be reflected in the cost of solar PV modules.

The solar PV industry relies on some important equipment such as inverters and solar PV modules. Recently, global shipping has experienced increases in freight rates while some ports have been experiencing port congestion. These events have invariably increased the shipping costs as well as created delays for some of the imported materials and equipment, which may impact the solar PV industry.

According to Budget 2022, a fund of RM485.0 million will be allocated for rural electrification which will benefit more than 2,100 rural households under the Rural Infrastructure initiative, and another fund of RM34.3 million will be allocated for rural water and electricity supply under the Development Projects for Recovery initiative.

Source: Vital Factor Consulting

Business strategies and prospects for SUNVIEW GROUP BERHAD

The Group’s business strategies and future plans are set out below:

1. The company plans to continue to expand its solar PV business
   1. EPCC and construction and installation of solar PV facilities
   2. Solar power generation and supply segment
2. The company plans to expand into other RE facilities and complementary products
   1. Expand into EPCC of biogas plants
   2. Expand into the provision of complementary products for solar PV power applications
3. The company plans to market expansion
4. The company plans to purchase operational equipment for the solar PV business operations.

MQ Trader View

Opportunities

1. The management has a full plan to expand their business. For example, they have a complete step to execute on expanding their solar PV business, expanding into other RE facilities and complementary products, plan to market expansion and they also plan to purchase operational equipment for the solar PV business operations.

Risk

1. The financial performance is dependent on the ability to continually secure new and sizable projects to ensure the sustainability of the business. The nature of the business is mainly project-based where the revenue is driven by the execution and completion of EPCC, and the construction and installation of solar PV facilities. There is a risk that the company may not be able to secure sufficient new and sizable projects to sustain the business.
2. The company's business and financial performance may be affected if there are delays or cancellations of the project. In the event of any delays in the completion of the projects, the company will be liable for claims and/or penalties from customers on LAD comprising delay LAD, abandonment LAD, and performance LAD, which may adversely affect the financial performance and reputation.
3. The company might be involved in customer concentration risk. The top customer contributes the majority of the revenue of the company. We also realize that the length of the business relationship of the top 5 clients is not over 2 years, this will also increase the risk of concentrating on customers.

Click here to refer the IPO - Sunview Group Berhad (Part 1)

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