• Downgrade to NEUTRAL from Buy, MYR0.76 TP, 7% upside. FY22 (Jun) results beat our expectations, driven by stronger-than-expected revenue contributions. While Samaiden’s orderbook remains robust, we believe elevated and rising solar panel prices could cause some commercial and industrial (C&I) customers to withhold their rooftop solar installations. While we still like its long-term prospects, we also think the stock’s recent 27% rally and FY23F P/E of 14.8x has priced in near-term prospects, while high solar panel prices may hinder a further re-rating of the sector.

• FY22 core profit of MYR12.4m beat our expectation (112% of our FY22F), but came within the Street projection. Margins are in line, with the deviation mainly due to higher-than-expected revenue, as 4QFY22 saw the recognition of some large-scale solar (LSS) 4 and C&I EPCC contributions.

• Results review. Revenue rose 23% QoQ, mainly due to the aforesaid reason, but profit fell 23% QoQ largely on: i) The higher cost of solar panels, ii) year-end impairments (seasonally weaker 4Q); iii) higher staff costs. YoY, revenue and profit jumped from a locked-down FY21, where the group faced disruptions in its project delivery.

• Outlook. As of end-June, Samaiden’s orderbook stood at MYR358m, down from MYR403m in May, as some orders were recognised. Of its last reported tenderbook of MYR1bn, we understand there are three LSS4 EPCC bids remaining – with management confident that it can win at least one more contract, which we have baked into our FY23F revenue. With the LSS4 power purchase agreements extended to 25 years from 21 years, all eyes are now on LSS5, on which we believe the Energy Commission may start the bidding process early next year. With its strong track record and experience, Samaiden stands a good chance to win some LSS5 EPCC contracts, in our view. Note that we have yet to factor in any overseas contribution, which may commence in 2023 and start contributing in FY24.

• With elevated and rising solar panel prices, its large C&I customers have been withholding their rooftop solar installations, as Samaiden has had to raise the price of its turnkey services. With the global rush to install solar panels due to higher electricity tariffs (eg in the UK) and the widespread energy crunch, solar panel supply tightness will likely prevail into 2HCY22 – thereby sustaining high solar panel prices, in our view.

• We maintain our forecasts and introduce FY25F core profit of MYR30m, ie 25% YoY growth from LSS5 EPCC contributions. Our TP is based on 15x FY23F P/E, with a 4% ESG premium applied. Our rating downgrade is due to the fact that the stock’s recent 27% rally likely points to near-term prospects being priced in, while high solar panel prices would hinder a further re-rating of the sector, and as excitement on the LSS5 tender may only come early next year. Its 14.8x FY23F P/E is at a premium to the Malaysian utilities peer average of c.12x, and below its larger Main Market-listed solar peer’s c.20x. Key downside risks include the inability to secure more projects, and higher solar panel prices, which may erode margins and delay projects. The reverse of such circumstances would present upside risks.

Source: RHB Research - 1 Sep 2022