Bright future on the books for Solarvest
13 Dec 2023
Backed by strong fundamentals, Solarvest Holdings Bhd’s earnings are expected to grow by 53% in financial year 2024 (FY24) and 67% in FY25, respectively, says Kenanga Research.
The company is a leading local photovoltaic (PV) system contractor with a 30% local market share and has completed projects under the large-scale solar (LSS), Corporate Green Power (CGPP) and feed-in tariff (FiT) programmes driven by the government, as well as its own rooftop assets.
It is also building a portfolio of PV assets for recurring income, Kenanga Research said in a note to clients yesterday.
The company has also made some inroads into regional markets such as Taiwan, the Philippines and Singapore, the research house added.
According to Kenanga Research, the recently announced National Energy Transition Roadmap (NETR) lays down the pathway for Malaysia’s transition to renewable energy (RE) with a target of RE making up 70% of generation capacity mix by 2050.
“We foresee solar energy accounting for over 90% of the new RE capacity (more than 20GW) in Malaysia, backed by various initiatives including FiT programme, Net Energy Metering (NEM) mechanism, LSS and CGPP.
“The lifting of the export ban on RE and the establishment of a central electricity exchange operated by a single aggregator to ensure pricing transparency will provide additional growth impetus to the local RE sector,” the research firm said.
Given Solarvest’s multiple earnings drivers, Kenanga Research expects the company’s earnings to be supported by its outstanding engineering, procurement, construction and commissioning (EPCC) order book of RM289mil that will keep it busy for two years and a tender book amounting to 3.1GW peak (Malaysia: 52%, regional: 48%).
In addition, the group has asset ownership in LSS4 (67.3MW peak), its Powervest financing programme (88MW peak) and EPCC project opportunities amounting to at least 250MW peak through CGPP.
Kenanga Research, which has an “outperform” call on the stock, has set a target price of RM1.47.
“We like Solarvest for the bright outlook of the RE market in Malaysia, underpinned by the government’s strong commitment towards RE, the export potential of RE and the increased commercial viability of solar-power projects on falling solar panel prices,” it added.
The company also has a strong market position, execution track record, clientele and value proposition of its PV system financing programme.
Furthermore, Solarvest’s strong earnings visibility is backed by a sizable outstanding order and tender books, and recurring income from a growing portfolio of solar assets, added Kenanga Research.
The key risks include the dependency on the government’s RE policy, low entry barriers, potential rise in project costs and asset ownership risks.
Source: The Star
