• Reiterate BUY, new MYR1.29 TP (SOP) from MYR1.05, 13% upside. Samaiden Group announced its fourth and largest Large-Scale Solar 4 (LSS4) EPCC contract win worth MYR181.4m yesterday. We continue to like the stock as a beneficiary of Malaysia’s strong demand for solar energy. Given its proven track record, the group is likely to continue seeing robust contract wins as more renewable energy initiatives are introduced.

• Largest LSS4 EPCC contract win. Samaiden has been awarded the EPCC works for a 50MWac LSS4 plant in Kuala Muda, Kedah, by Suria Infiniti, an indirect associate of Uzma (UZMA MK, NR). The contract is valued at MYR181.4m, bringing the group’s total LSS4 EPCC contract wins to c.MYR344.4m or 90MWac. This exceeds our expectation, as we had not imputed more LSS4 EPCC contract wins in our forecasts.

• Outlook. With this new contract, Samaiden's orderbook stands at MYR388m – a 58% increase from the previous MYR245.6m reported in 3QFY23 (Jun). GPM is guided to be similar to previous LSS4 contracts at 10-15%. The group has received limited notice to proceed with site clearing, and expects installation and construction to start by the end 1QFY24 or early 2QFY24. The construction itself will take c.12 months. Recently, Samaiden also secured a 20-year power purchase agreement or PPA with Yakult Malaysia for two solar facilities with a capacity of 496.26kWp and 212.22kWp. Although this brings minimal impact to earnings, it is a testament of the growing demand for solar energy from commercial & industrial clients – stemming from higher tariffs and lower panel costs.

• Maintain BUY. We raise our FY24F-25F earnings by 22-20% after increasing our orderbook assumptions by another c.MYR300m for this period – mostly driven by the upcoming Corporate Green Power Programme or CGPP. Our new SOP-derived TP of MYR1.29 is based on an unchanged 20x FY24F P/E. This is at a 20% discount to larger peer Solarvest’s (SOLAR MK, BUY, TP: MYR1.28) c.25x – given that the latter secured a few asset contracts in the previous LSS4 round – and DCF (WACC: 7.8%) on Samaiden’s 60% biogas asset. Our TP is inclusive of a 6% ESG premium based on its 3.3 ESG score, which is above the 3.0 country median.

• Downside risks include discontinuation of solar incentives, competition risks, and higher-than-expected project costs.

Source: RHB Research - 12 Jul 2023