• Reservoir Link Energy Berhad (RL) announced that their listing will be transferred to the Main Market effective 27th of June 2022.

• We are positive with this news as it will boost its status amongst institutional investors. Besides that, we think it could be a good alternative for investors looking for exposure in credible solar contractors given its discounted valuation relative to other player in Main Market.

• RL’s earnings forecast remain intact as the company is set to benefit from further recovery in offshore activities in line with higher Petronas’ capex spending.

• Maintain our BUY recommendation with unchanged TP of RM0.52 which implies 13x FY23F P/E. We think it’s timely to revisit the stock as the stock price has dropped below its IPO price of RM0.41.

To be transferred to Main Market

Reservoir Link announced that its listing will be transferred from the ACE Market to Main Market effective on 27th June 2022. The company will be categorised under ‘Energy” sector and “energy infrastructure, equipment and service” subsector.

Our view

We are positive with this announcement as it will give the company greater recognition and visibility particularly from institutional investors which may have some restriction to invest in companies listed on the ACE market. Besides that, we think it could be a good alternative for investors looking for exposure in solar companies given its discounted valuation. Note that another Main Market pure-play solar player, Solarvest is trading at 21x FY23F P/E (versus RL’s 8x FY23F P/E).

Earnings outlook

RL’s earnings outlook remain intact with earnings forecast of RM5.9m/RM11.7m/RM16.1m in FY22F/FY23F/FY24F respectively. We expect RL to return to profitability in coming quarters as upstream activities is expected to stage further recovery in line with higher Petronas’ capex spending. Its outlook is also well supported by income from the RE solar projects. To recap, the company recorded its first quarterly losses since IPO listing in 1QFY22 mainly due to the completion of its PWC service in Mauritania and seasonally lower offshore activities in 1Q due to monsoon season.

Maintain ‘BUY’ call with unchanged TP of RM0.52

We maintain our BUY recommendation on RL with SOP-derived TP of RM0.52. Our TP implies 13x FY23F P/E. Our BUY recommendation is premised on (i) its favourable prospects from well services, and (ii) growth potential in both the O&G and RE space.

Source: BIMB Securities Research - 24 Jun 2022