What’s New?

Samaiden Group (SAMAIDEN) has entered into a shareholders’ agreement with Chudenko (Malaysia) Sdn Bhd (CDKM), a wholly owned subsidiary of Japan-listed Chudenko Corporation, to undertake joint investments in solar PV facilities and related services. SAMAIDEN will take up a 51% stake in the JV while CDKM will own the remaining. Chudenko Corporation is currently a major shareholder of SAMAIDEN with a 13.9% stake.

Establishing a Japanese Client Base

While details are still scarce on the venture, we gather that the JV, with the assistance of Chudenko, which is a well-established Japanese corporation, is looking to offer solar PV solutions for Japanese multinational corporations and companies operating in Malaysia. The JV will be looking to offer solutions via the Net Energy Metering (NEM) and Self-Consumption (SELCO) schemes for these potential clients. We understand there are already prospective projects in the pipeline involving up to 5MW solar PV capacity.

Still Early Days, But How Could the JV Add Value?

While still early days to factor into our projections, we estimate that a 5MW rooftop solar PV project could involve capex of circa RM18-19mn (RM9-10mn based on SAMAIDEN’s 51% share), which should be easily manageable given SAMAIDEN’s strong balance sheet that entails a net cash of RM124mn as at endJune 2024. In terms of potential value accretion, our back of the envelope estimate suggests every 5MW of solar PV asset could add around 1sen per share to our valuation and 1.4% to annual earnings (net of SAMAIDEN’s 51% stake), assuming mid-to-high single digit PIRR and a 20-year power purchase agreement (PPA) tenure. Furthermore, we reckon the JV might tap on SAMAIDEN’s expertise in solar EPCC.

Impact

No change to earnings forecasts at this juncture pending further concrete development of the JV’s prospective projects.

Recommendation

We maintain our Buy recommendation on SAMAIDEN at unchanged SOPderived TP of RM1.30/share. Notwithstanding the JV with CDKM, SAMAIDEN is on track to double its revenue by FY26 backed by a strong orderbook of RM405mn (which represents 1.8x the group’s record high FY24 revenue). Furthermore, SAMAIDEN is approaching a strong orderbook replenishment cycle underpinned by EPCC award for CGPP and upcoming LSS5 projects. Meanwhile, some 30MW of new RE assets in the pipeline (net of SAMAIDEN’s stake in the respective assets) is set to boost recurring income over the next 3 years. From a valuation standpoint, SAMAIDEN is trading at just 16.8x/12.9x 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) as the sector enters an upcycle in RE capacity plant-up. Net cash accounts for up to 30% of market cap.

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 - 22 Oct 2024