• Maintain BUY and MYR1.55 TP (SOP), 24% upside. FY23 (Jun) earnings met expectations, in which full-year bottomline saw a decline due to lower margins from ongoing projects. Nonetheless, we still like Samaiden Group on the backdrop of Malaysia’s target to achieve a 70% renewable energy or RE capacity mix by 2050. We also expect the group to reach record high earnings for FY24 on its robust MYR372.8m orderbook.

• FY23 core earnings of MYR10.3m (-16% YoY) came within our expectation but missed consensus, at 102% and 90% of full-year forecasts. Samaiden declared a 0.5 sen interim dividend, which was a pleasant surprise.

• Results review. 4QFY23 core earnings increased by 78% QoQ to MYR3.4m on higher revenue (+2% QoQ) and operating income (+90% QoQ) – further elevated by improving GPM (4QFY23: 17.1% vs 3QFY23: 14%). The better margins are attributed to Samaiden’s cost optimisation efforts in terms of procurement. Nevertheless, FY23 core earnings fell 16% YoY on lower margins for ongoing projects, higher staff-related expenses (+39%), and elevated interest costs (+60%).

• Outlook. In the first announcement of the Corporate Green Power Programme (CGPP), the group unfortunately did not manage to secure any quotas. Nevertheless, management guided that it is in the midst of preparing submission documents to tender for the remaining quotas (236.6MW). Furthermore, EPCC jobs coming from the CGPP (expected to come out sometime in end 2023 or early next year) will likely benefit Samaiden and provide replenishment for utility scale projects in its orderbook. As of FY23, the group’s orderbook jumped 51.8% to MYR372.8m (2.2x cover ratio) from 3QFY23’s MYR245.6m. This comes from the addition of a new 50MW Large Scare Solar 4 or LSS4 programme contracts won during the quarter. Hence, the current breakdown of the orderbook is about 60:30:10 for LSS, commercial & industrial (C&I) and residential, and biomass.

• Keep BUY. We maintain our earnings estimates and introduce FY26 forecasts on the assumption of a MYR360m orderbook replenishment coming from utility scale projects and C&I jobs. Our SOP-derived TP (Figure 1) is unchanged at MYR1.55, pegged to 24x FY24 P/E, which is at a 20% discount to Solarvest’s (SOLAR MK, BUY, TP: MYR1.53) c.30x – given the latter’s larger asset base and bigger regional presence. Our TP also includes a 6% ESG premium, given Samaiden’s 3.3 ESG score, which is above the country median of 3.0.

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

Source: RHB Securities Research - 1 Sept 2023