SAMAIDEN's subdued 1QFY25 results were within expectations as a robust performance is expected in 2HFY25, underpinned by a record-high outstanding order book of RM521m, largely driven by Corporate Green Power Programme (CGPP). We remain optimistic on the recent roll-out of RE initiatives (i.e. CGPP, LSS5 and CRESS), ensuring a steady pipeline of projects for EPCC players despite rising competition. We maintain our forecast but lift our TP by 4% to RM1.57 (from RM1.51) after rolling forward the valuation base year. Maintain OUTPERFORM call.

Within expectations. Its 1QFY25 core net profit of RM3.3m came in at only 14% and 16% of our full-year forecast and full-year consensus estimate, respectively. While the weaker 1HFY25 performance was expected following the completion of LSS4, we consider the results in line with expectations given the anticipated pick-up in activity for solar EPCC players in 2HFY25 driven by the CGPP's tight completion deadline by end-2025.

YoY, its 1QFY25 revenue grew 7% driven by higher work progress in ongoing projects, particularly the RM100m contract for the 50MWac solar power plant in Kulim Hi-Tech Park, which is 58% completed and on track for delivery by March 2025. As a result, its core net profit also rose by 13% driven by higher-margin projects in the LSS and C&I sectors compared to LSS4 coupled with the decline in solar module prices.

QoQ, its 1QFY25 core net profit plunged 43% due to: (i) the completion of LSS4 projects, and (ii) margin normalization due to the absence of lumpy profit recognition previously realised from UZMA's (OP; TP: RM1.45) account closure.

Outlook. We expect a new wave of solar EPCC jobs in coming months underpinned by: (i) the 800MW Corporate Green Power Programme (CGPP) with an end-2025 completion deadline, (ii) the 2GW LSS5, the largest amongst the five LSS programmes, which also allows developers to bid up to 500MW (vs. only 50MW previously) with commissioning scheduled in 2026, (iii) an additional quota of 400MW (residential: 100MW; commercial: 300MW) from Feb to Dec 2024 under the Net Energy Metering (NEM) initiative, and (iv) the Solar For Rakyat Incentive Scheme (solaRIS) (using the additional 100W NEM quota for the residential segment) where participants will be offered rebates ranging from RM1,000/kWac up to RM4,000. We estimate that the CGPP and LSS5 will translate to at least RM2.4b and RM5b, respectively, worth of solar EPCC contracts with expectations that SAMAIDEN can secure at least 10% of the total contract value. Additionally, the recently unveiled Corporate Renewable Energy Supply Scheme (CRESS), expected to see at least 2GW of applications, will further boost the solar EPCC sector. SAMAIDEN's earnings visibility will also be underpinned by an all-time high outstanding order book of RM521.2m (CGPP: 45%, C&I: 16%, Others: 39%) that will keep it busy for at least the next 18 months.

Forecasts. Maintained.

Valuations. However, we lift our TP by 4% to RM1.57 (from RM1.51) as we roll forward our valuation base year to FY26F (from FY25F) based on SoP valuation, valuing its EPCC segment at 30x fully-diluted FY26F EPS of 4.9 sen, in line with the average forward PER of peers such as SVLEST (OP; TP: RM1.91) and SUNVIEW (Not Rated) and DCF for its CGPP and biomass assets. Our TP imputes a 5% premium given its 4- star ESG rating as appraised by us (see page 4).

Investment case. We continue to like SAMAIDEN for: (i) the bright outlook of the RE sector in Malaysia, underpinned by the government's goal of RE making up 70% of total generation mix by 2050, (ii) the increased commercial viability of solar power projects on falling solar panel prices and the export potential of RE, (iii) its position as one of the top players in the local solar EPCC market, (iv) its ability to provide end-to-end solutions, including financing, and (v) its proven track record in delivering projects on time and within budget. Maintain OUTPERFORM.

Risks to our call include: (i) the government dials back on RE policy, (ii) influx of new players in the EPCC space, intensifying competition, (iii) project execution risks including cost overrun and project delays, and (iv) escalating cost of inputs, particularly, solar panel and labour.

Source: Kenanga Research - 2 Dec 2024