• MYR0.55 FV based on 15x CY23F P/E. At MYR0.29/share, Sunview will raise MYR34.2m (118m shares) from its IPO. Proceeds will mainly go towards funding working capital and repaying bank loans. The group’s future earnings (3-year CAGR of 29%) will be supported by its current orderbook (5.6x FY22 revenue), and order replenishments driven by Malaysia’s growing renewable energy (RE) mix. The IPO price implies an undemanding 8x CY23F P/E – especially in view of its sturdy earnings growth, driven by growing demand for solar EPCC services and renewable energy.

• A solar EPCC contractor and solar asset owner. Sunview was previously (and mainly) a sub-contractor for solar EPCC jobs, but has transformed itself into becoming an EPCC contractor in its own right. Currently, the group derives the bulk of its revenue by providing EPCC services on: i) Utility-scale large-scale solar (LSS) projects, and ii) solar photovoltaic (PV) facilities for commercial and industrial (C&I) clients. It also owns solar PV facilities on clients’ rooftops, and operates them for a fixed concession period under power purchase agreements (PPA). Currently, it owns 18 solar PV facilities with a collective installed capacity of 7.74MWp, which should generate a recurring revenue base of c.MYR3m (4% of FY22 revenue). The group plans to add an installed capacity of 0.38MWp in FY23, and looks to continue building or acquiring more solar assets, using a mix of equity and debt funding.

• Beneficiary of Malaysia’s RE commitment. 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 of such projects that Sunview can capitalise on. With a reputable track record and its soon-to-be listing status, it is well positioned to win more LSS contracts, in our view. The group should also benefit from the growing demand for solar PV facilities from C&I clients, fuelled by: i) Growing ESG awareness and desire for a higher RE mix to be ESG-compliant; and ii) potential cost savings from using solar, given the possible hike in electricity tariff rates in 2023. Sunview also aims to venture into the EPCC of biogas facilities in the near future.

• >100% YoY earnings growth driven by strong orderbook. Currently, it has an unbilled orderbook of MYR558m, providing a 5.6x cover. We forecast 3- year earnings CAGR of 29%, driven by its current orderbook and future project replenishments. We also think that margins will soften in FY23F on the back of larger LSS contributions, higher solar panel prices, a stronger USD/MYR rate and higher labour costs.

• Valuation. We ascribe a P/E of 15x on CY23F EPS to arrive at our fair value of MYR0.55. The 15x forward P/E is the same as what we ascribed to Samaiden (SAMAIDEN MK, NEUTRAL, TP: MYR0.76), and is at a premium to the Malaysian utility peer 2023 P/E average of 11x – which is justified, given its relatively brighter growth prospects. Key risks include the inability to secure more projects (thereby likely generating cost overruns), and a rise in solar panel prices, which could erode margins and delay projects.

Source: RHB Securities Research - 30 Sept 2022