• Initiate BUY, SOP-based MYR0.76 TP offers 21% upside. Samaiden stands to benefit from the pick-up in renewable energy (RE) adoption in the region. Its sturdy MYR403m orderbook (7.5x FY21 revenue) and MYR1bn tenderbook should fuel a 3-year earnings CAGR of 26%. We like its pivot into RE asset ownership for recurring income, and the eventual decrease in its reliance on EPCC jobs. Helmed by an experienced team and supported by the inevitable RE adoption, its FY23 (Jun) P/E of 13x (vs our 15x) makes it an attractive BUY.

• Solar engineering, procurement, construction and commissioning (EPCC) service provider. Samaiden currently derives the bulk of its revenue from the EPCC of: i) Utility-scale large-scale solar (LSS) projects; and ii) solar photovoltaic (PV) systems for commercial and industrial (C&I) clients. Increasingly, it has been pivoting towards EPCC and the ownership of other forms of RE sources, such as biomass and biogas.

• Malaysia’s RE commitment is a boon. As the Government is targeting for 31% of Malaysia’s installed capacity to be made up of RE by 2025, these efforts will likely translate to more RE projects that Samaiden can capitalise on. With a reputable track record and its listing status, Samaiden is well- positioned to win more LSS contracts, in our view. The growth in demand for solar PV systems from C&I clients should further strengthen its orderbook.

• More recurring revenue streams. To reduce its reliance on a constant flow of EPCC projects, Samaiden became an RE asset owner by clinching its first biogas power plant contract in Nov 2020, with construction to be completed by Nov 2023. Additionally, it is looking to strike more power purchase agreements (PPA) with C&I customers – where Samaiden builds, owns and operates the solar PV systems for a pre-specified period.

• Regional ambitions. With its synergistic collaboration with Tokyo-listed engineering firm Chudenko, Samaiden is looking to expand into Japan as both an EPCC contractor and potential owner of solar PV systems for C&I clients. With other South-East Asian nations also actively growing their RE energy mix, Samaiden is actively exploring EPCC and ownership opportunities in Vietnam, Indonesia, Cambodia and the Philippines.

• Shining bright. We forecast a FY21-24 CAGR of 26%, driven by higher job wins fuelled by the growing demand for RE, to reach the 31% RE mix target in Malaysia. We are expecting 68-74% earnings growth in FY22-23. We assign an ESG score of 3.2 to Samaiden, and apply a 4% premium to our SOP-based intrinsic value to arrive at a TP of MYR0.76. The TP includes a DCF of its RE assets, and 15x P/E on FY23F earnings. The 15x is at a slight discount to its closest peer Solarvest’s (SOLAR MK, NEUTRAL, TP: MYR0.77) 20x. Given its strong earnings growth, Samaiden’s current market valuation of 13x FY23F P/E is undemanding.

• Key downside risks include the inability to secure more projects and (as such) cost overrun, and a rise in solar panel prices, which could erode margins and delay projects.

Source: RHB Research - 4 Aug 2022