We recently hosted a meeting with Samaiden Group Berhad (SAMAIDEN), which was represented by its Managing Director (Datuk IR Chow Pui Hee), Executive Director (Mr Fong Yeng Foon) and Chief Strategy Officer (Dr Tee Wu Shun). We left the meeting more convinced of SAMAIDEN’s growth prospects underpinned by a record high orderbook, strong net cash position and a secured pipeline of RE assets to boost recurring income. Re-affirm our Buy recommendation on SAMAIDEN at SOPderived TP of RM1.30/share.

Orderbook hits record high

The group’s EPCC orderbook has ballooned further to an estimated RM510mn (pre-project progress recognition for the 1QFY25 period), which is a record high and represents some 2.2x multiplier against the group’s FY24 revenue. This was boosted by another 30MWac CGPP project secured recently. The latest CGPP contract is estimated to be worth RM105mn, while the previous two CGPP contracts with combined capacity of 24MWac were valued at RM91mn. We estimate CGPP contracts now account for a total 39% of SAMAIDEN’s enlarged orderbook, while other utility scale solar projects account for 14%. Bioenergy, C&I and other projects account for the remaining (See Figure 1).

Keeping the momentum with a ballooning tenderbook

The group’s latest EPCC tenderbook has risen to RM1.6bn (from RM1.2bn previously). More than half of tenderbook comprise of utility scale solar projects, which includes LSS5 project bids. The rest of the tenderbook comprise of bids in the C&I, biomass and energy efficiency segments. Assuming LSS5 winning bids are announced this month (as indicated by the CEO of the Energy Commission ast month), SAMAIDEN expects LSS5 EPCC contracts to start trickling in from 1HCY25 onwards. The group is eyeing to at least maintain a 10% EPCC share in LSS5. To recap, LSS5 entails a record high capacity auction of 2000MW, which translates into estimated total EPCC value of RM7bn. In addition to utility scale solar, SAMAIDEN is bidding for Waste-to-Energy (WTE) projects regionally, leveraging on its expertise in bioenergy.

Speeding up delivery of CGPP projects

The official deadline for COD (Commercial Operation Date) of CGPP projects was set at end-CY25 by the Energy Commission, while for LSS5, COD is set within CY26. SAMAIDEN aims to speed up delivery of CGPP projects in order manage resources effectively to accommodate potentially larger capacity projects under LSS5. To recap, the LSS5’s 2000MW capacity on auction is more than double the CGPP’s total 800MW.

Aiming for 10%-15% of revenue from recurring income

SAMAIDEN is aiming for 10%-15% of revenue to come from recurring income. Theoretically, a 100MW solar capacity (at LSS tariffs of ~20sen/kwh) could generate circa RM30mn revenue/annum (vs. group revenue of RM227mn in FY24). The group is bidding for 100MW of solar assets under Package 3 of LSS5 as well as biomass and biogas capacity under the latest Feed-in-Tariff (FiT 2.0) program. To recap, FiT 2.0 will be opened for bidding between 15th January 2025 until 19th February 2025. A total of 50MW quota for biogas and 40MW biomass is being offered. As it stands, a total 30MW pipeline of secured RE assets (CGPP and biomass/biogas assets) are expected to come online over the next 3 years (see Figure 2). This will significantly boost the group’s capacity from the current 1.2MW, which is currently contributing <1% of revenue.

Capex looks manageable

We estimate that the four assets in the pipeline will require capex (net of SAMAIDEN’s stake in the respective assets) of RM192mn, of which RM38mn comprise of equity capex based on 80:20 debt:equity financing ratio. We believe this should be manageable given SAMAIDEN’s RM132mn gross cash position (net cash: RM124mn) and considering these assets will be completed gradually over the next 3 years. In addition, SAMAIDEN has established standby facilities of a total RM1.5bn (consisting of RM1.0bn 30-year Islamic Medium-Term Notes and RM0.5bn 7-year Islamic Commercial Paper) to fund capex, working capital, project investments, asset acquisitions and refinancing, as and when required.

Still some overhanging issues with CRESS

During the meeting, management shared that there are still some gaps in the Corporate Renewable Energy Supply Scheme (CRESS) mechanism that industry players are ironing out with the Government:

(i) Currently CRESS is only limited to new customers (which have no track record), hence affecting risk assessment by financiers – industry players are lobbying the Government to open up CRESS to existing electricity customers to mitigate and even out this offtaker risk.

(ii) CRESS system access charge (SAC) is seen as too high relative to grid power and not palatable by potential offtakers – industry players are lobbying for lower SAC and lower BESS requirement (current requirement is 4 hours storage at a minimum 50% of plant energy capacity) to reduce BESS cost.

Priority is currently given to LSS5 projects before CRESS takes off meaningfully once there is better clarity of available connection points post-LSS5 winning bid announcement later this month. Notwithstanding teething issues in the CRESS mechanism, we gather SAMAIDEN is already negotiating with potential offtakers in the data centre industry.

Cheap solar module prices a boon for the industry

President Donald Trump’s win in the latest US Presidential election is perhaps a potential positive catalyst for the sector. Given Trump’s protectionist policies, we believe higher import tariffs for solar panels, including from Southeast Asia, cannot be ruled out. A flooding of Chinese solar panels, in which its manufacturing capacity is also scattered across Southeast Asia, could drive a further drop in global solar module prices. This could be a silver lining for locally listed RE EPCC players and asset owners that could benefit from cheaper solar module cost. As it stands, solar module prices have dropped -64% off 2021-peak levels to the current USD0.10/watt range. We believe the benefits of cheaper module costs could reflect in the upcoming CGPP and LSS5 projects.

Recommendation

Re-affirm our Buy recommendation on SAMAIDEN at SOP-derived TP of RM1.30/share. SAMAIDEN is one of the prime beneficiaries of an upcycle in RE plant-up underpinned by record high orderbook, strong net cash position and secured pipeline of RE assets to boost recurring income.

From a valuation standpoint, SAMAIDEN is trading at just 17.4x/13.4x FY25/FY26 PER (FYE June), at a discount to historical mean PER of 20x. We see room for valuations to re-rate higher towards +1SD (25x PER) on the back of more aggressive RE plant-up domestically backed by the National Energy Transition Roadmap and an increasingly liberalised domestic RE market.

Key catalysts: (1) Further award of CGPP EPCC contracts. (2) Outcome of LSS5 bidding in November 2024 and EPCC contract awards thereafter. (3) CRESS project awards. Key risks are a sharp rise in raw material cost such as solar module and delays in project implementation.

Source: TA Research - 8 Nov 2024