• Maintain BUY and SOP-derived MYR1.06 TP, 26.4% upside. 1HFY23 (Jun) results broadly met expectations, given the softer demand as commercial and industrial (C&I) customers adopted a wait-and-see approach. With Large Scale Solar 4 (LSS4) works resuming, we expect a strong 2HFY23 recovery, backed by Samaiden Group’s robust orderbook. It continues to benefit from strong solar energy demand amidst Malaysia’s efforts to achieve 31% renewable energy (RE) mix target by 2025.

• Broadly within expectations. 1HFY23 results were broadly within expectations at 27% of our forecast – this is as a softer 1H is expected, given that C&I customers delayed solar installations due to high panel prices and a strong USD rate in 2H22. We expect stronger quarters ahead, with the recognition of Samaiden’s MYR269.5m orderbook from the resumption of LSS4 projects and higher C&I orders.

• Results highlights. YoY, 1HFY23 core profit of MYR5m increased 16.4% on the back of a 52.1% rise in revenue, mainly driven by the increase in the number of projects and a higher value of contracts. This is slightly offset by the rise in administrative expenses due to the increase in staff cost (+47%) and higher interest expenses (+74% YoY) to cater for the group’s continued business expansion.

• Outlook. As of end-Dec 2022, the group's orderbook stood at MYR269.5m, down from MYR325m in September, as some orders were recognised. We expect C&I orders to pick up in the coming quarters with the announcement of the higher Imbalance Cost Pass-Through (ICPT) surcharge in 1H23. The Corporate Green Power Programme (CGPP) quota of 600MW and new feed-in tariff quota of 187MW should entail the abundance of contract flows for 2023 to help replenish the group’s orderbook. The programme could also potentially offer an opportunity for Samaiden to expand its asset base should the group bid for project ownership.

• No changes to earnings and recommendation. We make no changes to our FY23-25F estimates, as we deem the results to be within expectations. Our SOP-derived MYR1.06 TP is based on 16x FY24F P/E, on par with Sunview’s (SUNVIEW MK, NR), its closest market-size peer. However, it is at a discount to larger peer Solarvest’s (SOLAR MK, BUY, TP: MYR1.34) c.25x, given that the latter clinched several asset contracts in the previous LSS round, besides having a larger regional presence. The TP is inclusive of a 4% ESG premium given Samaiden’s ESG score is above the country mean, based on our in-house proprietary methodology. Maintain BUY on potential further positive contract news flow from the C&I segment on the back of a higher ICPT surcharge rate. Further upside to our forecasts could stem from potential solar contract and asset wins from CGPP. Key downside risks include discontinuation of solar incentives and/or programmes, competition risks, and higher than expected project costs.

Source: RHB Research - 22 Feb 2023