• BMG is a key beneficiary of Malaysia’s NETR and global energy transition initiatives, positing itself favourably within the RE landscape
   
• We project a 3-year profit CAGR of 21%, driven by burgeoning opportunities in both bio-energy and solar sectors
   
• Initiating with a BUY and TP of RM2.65. BMG stands out as an attractive ESG play

Key beneficiary of NETR

BM Greentech (BMG) is a prominent renewable energy (RE) player, offering sustainable energy solutions through its bio-energy, solar, and water treatment expertise. Aligned with global environmental sustainability objectives and Malaysia’s RE goals, BMG is strategically positioned to capitalise on the country’s target of achieving 70% RE capacity by 2050. This is supported by government initiatives such as the National Energy Transition Roadmap (NETR) and programs like Net Energy Metering (NEM), as well as utility-scale RE projects, including Corporate Green Power Programme (CGPP) and Large-Scale Solar (LSS). With BMG making strides in green energy solutions, the company is poised to attract increasing investor interest and establish itself as a leading ESG investment with solid growth prospects.

Robust 3-year net profit CAGR of 21%

BMG’s bio-energy segment has historically been its largest profit contributor, accounting for 70% of the overall PBT. The recent acquisition of Plus Xnergy Holding (PXH) bolstered its position in the solar sector, allowing BMG to expand its presence across the value chain and engage more actively in government solar initiatives. As a key beneficiary of NETR, BMG is projected to deliver a 3-year net profit CAGR of 21% over FY24–27E, driven by 1) higher industrial project demand for bio-energy solutions and 2) growing solar project opportunities, which aligns with national energy transition goals. We estimate the solar segment to see increased contribution and to account for 30% of PBT by FY27E.

Initiate with BUY and TP of RM2.65

We initiate coverage on BMG with a BUY rating and an SOP-derived target price of RM2.65. We like BMG for its 1) compelling growth prospects, 2) sizeable addressable market driven by NETR initiatives, and 3) unique position as a scarce ESG investment opportunity. The backing of a firm QL shareholder further enhances its appeal. Key risks to our BUY call include unforeseen changes or delays in government policies and raw material price fluctuations.

Source: Philip Capital Research - 22 Oct 2024