• We remain positive on BMG’s outlook as its solar business continues to gain momentum, benefiting from government’s renewable energy initiatives

• BMG has secured 2 CGPP contracts, estimated to be worth a combined RM220m, and is bidding for several LSS5 contracts, with awards expected to roll out in 2HCY25

• Maintain BUY rating and SOP-derived target price of RM2.65

Expect Stronger Traction From Its Bio-energy Segment

BM Greentech’s (BMG) bio-energy segment revenue in 6MFY25 fell 15% YoY due to lower boiler deliveries in Indonesia. However, the PBT margin rose 4ppts to 14%, supported by a higher proportion of local deliveries. Although Malaysia has smaller volumes compared to Indonesia, its higher-specification boilers drive superior margins. We expect the segment margins to stabilize in 2HFY25 as delivery volumes in Indonesia recover.

Solar Business to See Strong Momentum

BMG has acquired Plus Xnergy Holding (PXH) in Nov24. It has recently partnered with Leader Energy to install Malaysia’s first 1.45MWh sodium-sulfur battery energy storage system (BESS), with construction expected to be completed by Dec24 and commissioning slated for 1QCY25. We estimate the project’s PBT margin to be c.8%, in line with typical solar EPCC projects. Management aims to secure more projects to capture a larger share of the government's 500MW capacity target by 2030. On other utility-scale projects, BMG has secured 2 CGPP contracts, 1 of which has begun construction. While the actual contract value was not disclosed, we estimate the combined contract to be worth c.RM220m, assuming a typical CGPP contract capacity of 30MW. In addition, BMG has submitted several bids for LSS5 projects, both as EPCC contractor and asset owner (under JV). Tender awards for LSS5 projects are expected to finalize by end Dec24, with EPCC contract awards anticipated in 2HCY25.

Maintain BUY and TP of RM2.65

We reiterate our BUY rating and SOP-derived target price of RM2.65. We continue to like BMG for its compelling growth prospects, sizeable addressable market driven by NETR initiatives and appeal as an ESG-focused energy solutions company. Key risks to our BUY call include unforeseen changes or delays in government policies and raw material price fluctuations.

Source: Phillip Capital Research - 6 Dec 2024