• Maintain NEUTRAL and MYR0.76 TP, 5% upside. 1QFY23 (Jun) was soft at 13% of our full-year estimate but within our expectations, given the delayed Large Scale Solar (LSS) 4 projects, corroborated with commercial and industrial customers’ “wait and see” strategy with regards to rooftop solar installations. We expect stronger LSS contributions in 2023, as project owners strive to secure financial close before end 2022. We highlight softening solar panel prices and a strong orderbook as potential key re- rating catalysts and consider that near-term prospects are priced in.

• Soft 1QFY23, but still within our expectations. 1QFY23 core profit of MYR2.44m made up only 13% of our and Street’s full-year estimates, but we still consider it within our expectations, given the lumpy nature of its progress recognition. Historically, the group’s quarterly earnings contributions can range from 17-37% of full-year earnings, with 1H earnings usually softer as most materials delivery occur early in the calendar year.

• The soft quarter was expected, as LSS4 power purchase agreements (PPA) were only extended in August, which means the LSS4 project owners are currently still securing – or have just recently secured – financial close. For the EPCC contractors, this means that most of the LSS4 contributions will only happen in 2023. We expected Samaiden’s commercial and industrial (C&I) customers to adopt a “wait and see” approach throughout the quarter, as they continue to postpone their solar photovoltaics system installations amid sustained high solar panel prices.

• The strengthening USD/MYR means Samaiden continues to see solar panel prices trend up in MYR terms despite being softer in USD terms. That said, while it has increasingly been transacting with its solar panel suppliers in CNY, its solar panel costs are – on a net level – still trending up.

• Outlook. As of end September, Samaiden’s orderbook stood at MYR325m (2.2x FY22 revenue), down from its end-June orderbook of MYR358m, as some orders were recognised. With the Energy Commission’s launch of the Corporate Green Power Programme on 7 Nov, Samaiden looks to: i) Assist C&I customers in submitting their bids for the virtual PPA, ii) act as EPCC contractor, and iii) bid for project ownership, if possible. This should continue to replenish its orderbook moving forward. While solar prices are still elevated, industry participants have suggested that prices could soften in tandem with the USD/MYR.

• We maintain our forecasts and recommendation, as results came in line. We maintain our SOP-derived MYR0.76 TP and our NEUTRAL call, as we think the current 15x FY23F P/E has priced-in near-term prospects. The 15x P/E we ascribed is comparable to its CY23 peer average of 14x. Our TP includes a 4% ESG premium for its above-country median ESG score.

• Key downside risks include the inability to secure more projects, and higher solar panel prices. The opposite represent upside risks.

Source: RHB Research - 17 Nov 2022