We are positive on UZMA’s diversification plans into the solar energy space. Overall, solar is expected to be the main driver of the group’s non oil and gas business, expected to reach ~RM500m revenue by 2025. While we believe execution and results delivery will still be key, any fruition of its diversification plans would serve as an immediate re rating catalyst. BUY with TP of RM0.68 pegged to 0.5x PBV, in-line with its mean valuations.

The group had set a five-year roadmap of achieving RM1.5bn revenue by 2025 – of which 40% is expected to be derived from non-oil and gas ventures with the group strategizing solar as the main growth driver of its non-oil and gas diversification plans – putting them in direct comparison with other listed peers e.g. SLVEST, SAMAIDEN, and PEKAT. UZMA made its maiden foray into the space through securing a 50MW solar project from the LSS4 tender last year, as well as the acquisition of Suria Infiniti – a solar EPCC player.

Currently, UZMA’s solar business already has an order-book of RM935m – with LSS4 (both PPA and EPCC) being the largest contributor. Going forward, the group intends to be a fully integrated solar player and over near-term growth will mostly be driven by securement of EPCC projects, as well as M&As of legacy PPAs (e.g. LSS1 projects) to build up its track record.

Malaysia Renewable Energy Roadmap (MyRER) aims for the country to achieve 31% renewable energy capacity by 2025, and 40% by 2035. This translates to >4GW of additional renewable energy capacity by 2025, and a further >5GW by 2035. Of the new renewable energy requirements, >90% is expected to be derived from solar – making solar the fastest growing source of renewable energy within Malaysia.

We do note that execution and results delivery will still be crucial. While the solar space is expected to see huge growth potential in the coming years, competition within the space is also stiff as it is crowded with many other competent and well established players. Nonetheless, we believe that any fruition or materialisation of UZMA’s ventures into the solar space will serve as immediate re-rating catalyst. Currently, listed solar players (e.g. SLVEST, SAMAIDEN, and PEKAT) are trading at a huge valuation premium compared to UZMA.

Source: Rakuten Research - 26 Apr 2022