Samaiden Group - A Cloudy Patch

Date: 
2023-11-29
Firm: 
KENANGA
Stock: 
Price Target: 
1.44
Price Call: 
BUY
Last Price: 
1.26
Upside/Downside: 
+0.18 (14.29%)

SAMAIDEN’s 1QFY24 results disappointed due to weak progress billings. Its 1QFY24 core net profit rose 21% YoY driven by Large Scale Solar (LSS) jobs and lower solar penal prices. Its earnings visibility is strong underpinned by an order backlog of RM351m. We cut our FY24F earnings forecast by 16%, reduce our TP by 20% to RM1.44 (from RM1.80) but maintain our OUTPERFORM call.

Within expectation. Its 1QFY24 core net profit of RM3m disappointed, coming in at only 16% and 14% of our full-year forecast and the full-year consensus estimate, respectively. The variance against our forecast came largely from weaker-than-expected progress billings from EPCC jobs.

Results’ highlights. YoY, its 1QFY24 revenue rose 13% driven largely by EPCC jobs for LSS projects (which have an end-CY23 completion deadline). Its core net profit rose by a sharper 21%, we believe, due to lower solar panel prices, which more than compensated for typically lower margins of LSS projects.

QoQ, its 1QFY24 revenue was flattish but its core net profit fell 17% as it delivered more low-margin LSS projects.

Outlook. SAMAIDEN’s long-term growth is well-supported by the National Energy Transition Roadmap (NETR) as announced by the government which sets an ambitious target of RE to make up 31% of total power generation capacity by 2025, and 70% by 2050. Also, businesses, driven by commercial reasons (i.e. to save cost) and ESG considerations, have voluntarily invested in solar energy generation assets following the recent hikes in electricity tariffs.

Notably, SAMAIDEN has emerged a major winner in the recent Corporate Green Power Programme (CGPP), securing a total capacity of 43.32 MWac for solar power generation. We believe the CGPP offers higher return vs. the LSS programme as the CGPP uses a willing-buyer willing-seller model with an estimated tariff rate of 25-28 sen/kWh (vs. 17-24 sen/kWh under LSS). In addition, we believe it is also poised to secure at least 15% of the total EPCC contracts under the CGPP, given its strong position in the solar EPCC market. Currently, its outstanding order book stands at RM351m (vs. RM373m three month ago) which can keep it busy for at least over the next 18 months.

Forecasts. We cut our FY24F earnings forecast by 16% to reflect weaker progress billings from EPCC jobs but keep our FY25F numbers.

Consequently, we cut our TP by 20% to RM1.44 (from RM1.80) based on 30x fully-diluted FY25F EPS of 4.8 sen, in line with the average forward PER of peers such as SVLEST (Not Rated) and SUNVIEW (Not Rated). Our TP imputes a 5% premium given its 4-star ESG rating as appraised by us (see page 4).

We continue to like SAMAIDEN for: (i) the bright outlook of the RE market in Malaysia; (ii) its strong market position, being the second largest solar EPCC contractor locally, (iii) its ability to provide end-toend services, including financing, (iv) its strong execution track record, and (v) its strong earnings visibility backed by a sizeable outstanding order book. Maintain OUTPERFORM.

Risks to our call include: (i) the government dials back on its RE policy, (ii) project cost overrun and liabilities arising from liquidated ascertained damages (LAD), and (iii) escalating cost of inputs, particularly, solar panel and labour.

Source: Kenanga Research - 29 Nov 2023

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