• Keep BUY, new SOP-derived MYR1.53 TP from MYR1.46, 18% upside. Post the announcement of the shortlisted bidders for the Corporate Green Power Programme (CGPP), we remain positive on Solarvest continuing to build recurring income via solar assets, and further strengthening its EPCC order replenishment for the next two years. It is well-poised to benefit from the country’s transition towards renewable energy and should stay at the forefront of the local pure-play solar EPCC sector.

• CGPP announcement. The Energy Commission shortlisted 22 solar power producers under the CGPP. The first announcement awarded a total capacity of 563.42MW, with plant capacity ranging between 7MW and 30MW. A 21-year power purchase agreement is expected to be signed between Tenaga Nasional (TNB MK, BUY, TP: MYR12.40), selected power producers, as well as their offtakers. These plants are expected to commence operations in 2024-2025.

• Won a total of 90MW solar assets. Solarvest, via its subsidiary/special- purpose vehicle Atlantic Blue, Blazing Solar, and Solarvest Asset Management won three solar assets (totalling 90MW) under three different consortiums. The financial details are being finalised – shortlisted power producers are required to apply for participation in the New Enhanced Dispatch Arrangement (NEDA) programme within three months after the date of notification of the application status. Approvals could take 3-6 months. We expect significant recurring income contributions to kick in starting FY26.

• EPCC contracts flow. While EPCC contracts have yet to be announced (likely in the next 3-6 months), we understand that Solarvest has the first right of refusal to a total of 175MW (31% of the announced 563.42MW capacity) of EPCC jobs (including its assets), as it previously undertook the CGPP design and consultation work for these clients. This is above our assumption of 150MW for CGPP. Assuming a contract of MYR3m/MW, the total contracts could be worth up to c.MYR525m.

• We revise its FY25F orderbook replenishment on potentially higher EPCC job wins from CGPP, leading to FY25-26F earnings likely being higher by 10.2-11.9%. Consequently, our TP rises to MYR1.53. Further upside for our TP should stem from recurring income from the newly secured assets – we have yet to bake this into our assumptions, pending further details. Our TP is based on an unchanged 30x CY24F P/E (1SD above the 3-year mean) and DCF valuation (WACC: 5.4%) on its LSS4 solar assets. Our TP also includes an 8% ESG premium, as Solarvest’s 3.4 ESG score is four notches above the country median.

• Risks: Lower-than-expected contract wins, unexpected changes in project costs, and lack of progress in its Taiwan and Philippines overseas ventures.

Source: RHB Research - 8 Aug 2023