• Maintain BUY and MYR1.55 SOP-based TP, 39% upside. Samaiden Group’s 1QFY24 (Jun) earnings broadly met expectations. We expect to see stronger quarters ahead, with the progress of its newly awarded 50MW Large Scale Solar 4 (LSS4) project. Furthermore, its robust orderbook of MYR350.7m and Malaysia’s commitment to move ahead in the energy transition should further support the group’s earnings growth.

• Soft 1QFY24, but still within our expectations. 1QFY24 core profit of MYR2.8m made up only as in line, given the lumpy nature of its progress recognition. We anticipate stronger earnings in the upcoming quarters as the 50MW LSS4 project has begun construction works, and is expected to see major progress in 3QFY24.

• Results review. 1QFY24 core earnings decreased by 16% QoQ to MYR2.8m on higher COGS (+5% QoQ) and ETR (+23% QoQ). This was slightly offset by lower administrative expenses (-21% QoQ). YoY, core earnings increased by 17% on the back of the revenue growth (+13%).

• Utility-scale asset ownership. Having missed out on the first batch of the Corporate Green Power Programme (CGPP) allocation, Samaiden managed to secure two contracts with a total gross capacity of 43.3MW – one on its own and another under a consortium with Premier Supreme. We are positive on this, as it marks Samaiden’s foray into utility-scale asset ownership that will contribute more substantially to its recurring income – likely to be reflected in FY26.

• Outlook. As of end-September, Samaiden’s orderbook stood at MYR350.7m, down 6.3% from its end-June orderbook of MYR358.0m, as some orders were recognised. Meanwhile, the group’s tenderbook stood at MYR1.2bn, with some close to the finalisation stage and management hopes to crystallise these into its orderbook. Moreover, as the Energy Commission has exhausted the 800MW CGPP allocation, we expect to see EPCC tenders to roll in early next year, which should help replenish Samaiden’s orderbook and support its FY24-26 earnings.

• We maintain our forecasts and recommendation, as results are broadly in line. We maintain our TP (Figure 2) of 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 – in view of the latter’s larger asset base and extensive regional presence. Further upside for our TP should stem from the recurring income of the newly secured assets as we have yet to factor this into our assumptions, pending further details. 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 downside risks include a discontinuation of solar incentives, competition risks, and higher-than-expected project costs. 

Source: RHB Securities Research - 29 Nov 2023