• Reiterate BUY, new MYR1.55 TP (SOP) from MYR1.29, 20% upside. Post the National Energy Transition Roadmap (NETR) launch, we are upbeat on Samaiden Group as a beneficiary of strong local demand for solar energy. The group is poised to benefit from the ongoing acceleration of renewable energy (RE) adoption as Malaysia aims to achieve an RE target mix of 70%.

• The 10 flagship catalyst projects for the NETR includes specialised RE zones – one is an integrated RE zone championed by Khazanah Nasional where development will span across the entire energy supply chain. Other than that, Tenaga Nasional (TNB MK, BUY, TP: MYR12.40) will co-develop solar parks with SMEs, cooperatives, and state economic development corporations. There will be a total of five solar parks located in several states with each site having 100MW capacity. Moreover, Sime Darby Property (SDPR MK, BUY, TP: MYR0.55) is looking to construct 4.5MW solar capacity across its 450 homes at Elmina and Bandar Bukit Raja. With a minimum of 4GW capacity and assuming the average EPCC contract is valued at MYR2.5m/MW, this would be worth MYR10bn of job opportunities for the next few years. Hence, we believe Samaiden will be able to grow its orderbook which is c.MYR388m after its latest Large-Scale Solar 4 or LSS4 contract win in July.

• Building recurring income. Samaiden also recently secured a 20-year power purchase agreement or PPA with Yakult Malaysia for two solar facilities, aligning with its strategy to grow its asset base. We anticipate that the Corporate Green Power Programme or CGPP could further boost the group’s solar assets.

• Maintain BUY. We raise our FY24F-26F (Jun) earnings by 2-9% on the assumption of higher EPCC orders given the newly introduced RE capacity. Our new SOP-derived TP (Figure 1) is lifted to MYR1.55 as we: i) Increase earnings estimates and ii) ascribe a higher target P/E of 24x, which is at a 20% discount to Solarvest’s (SOLAR MK, BUY, TP: MYR1.28) c.30x – given the latter’s larger asset base and bigger regional presence – from 20x. The re-rating of the RE sector is premised on the Government’s efforts to achieve its RE target mix of 70%, evidenced by the injection of c.4GW capacity and a major uplift from the previous rollouts of the LSS or CGPP initiatives, which introduced 800-1000MW/cycle targets. Our TP also includes a 6% ESG premium given Samaiden’s 3.3 ESG score, which is above the country median of 3.0.

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

Source: RHB Research - 28 Jul 2023