Ambitious RE drive positive for industry
13 Jul 2023
The government’s strong support to develop a green economy will open up “pockets of opportunities” in the renewable energy (RE) sector.
MIDF Research said in a note that engineering, procurement, construction and commissioning (EPCC) players are broadly expected to benefit from Malaysia’s RE drive.
Among the potential beneficiaries are Solarvest Holdings Bhd, Samaiden Group Bhd, Sunview Group Bhd and Pekat Group Bhd.
“At this juncture, our top picks are YTL Power International Bhd as a play into RE exports and the group’s new strategic focus on building up RE and data centre capacity.
“Tenaga Nasional Bhd is a potential beneficiary of grid investments to accommodate variable RE growth in the mix.
“We also like Ranhill Utilities Bhd – although Ranhill’s core business is in water operations, it has exposure to power generation assets and is beefing up efforts to grow RE capacity via the Large Scale Solar (LSS) scheme and Corporate Green Power Programme (CGPP),” it said.
MIDF Research also pointed out that the government has set an “ambitious” target of achieving 70% RE capacity mix by 2050.
This marks a significant increase compared to the 31% target by 2025 and 40% target by 2035.
The higher target is part of the Energy Transition Roadmap (ETR). The first phase of the ETR will consist of 10 national flagship energy transition projects to be developed with the participation of the private sector.
MIDF Research noted that the first phase of the ETR encompasses strategic projects and initiatives such as hydrogen, solar farms as well as RE special zones.
The second phase is expected to involve enablers such as legislative reforms, incentive funding that will be put through to accelerate the transition.
“A hydrogen economy technology roadmap is also expected to be announced in the second half of 2023, which is expected to outline initiatives to develop Malaysia’s hydrogen economy.
“Based on Irena’s RE outlook, hydrogen will provide a complementary solution to meet Malaysia’s ambitious climate objectives, where green hydrogen could comprise up to 5% of total final consumption (including non-energy use) by 2050,” the research house said.
Irena or the International Renewable Energy Agency is an intergovernmental organisation mandated to facilitate cooperation, advance knowledge, and promote the adoption and sustainable use of RE.
Meanwhile, Hong Leong Investment Bank (HLIB) Research initiated coverage on the RE sector yesterday with an “overweight” call premised on a strong energy transition theme.
It added that the sector is expected to grow and benefit from the apolitical multi-year energy transition theme.
“We believe the growth of environmental, social and governance (ESG) investing could drive a re-rating of RE stocks with tepid supply in the Malaysian market.
“The two stocks we initiate with this report are the only Main Market-listed solar EPCC players,” according to HLIB Research.
It initiated coverage on Samaiden with a “buy” call and a target price of RM1.43 per share. It also initiated coverage on Solarvest with a “hold” rating and a target price of RM1.20 per share.
Looking ahead, HLIB Research opined that the key catalysts for the RE sector include CGPP awards, Budget 2024 and future roadmaps or implementation plans.
Based on checks with industry players, HLIB Research said the next large-scale solar rollout in the form of previous LSS programmes could come later rather than sooner.
“This is mainly due to extensions to commissioning dates for LSS4 capacities (823MW) as well as ongoing rollout of the 800MW CGPP.
“The possibility remains that the next solar programme will come in the form similar to the ongoing CGPP programme rather than via the LSS route.
“We note that the current CGPP has seen its submission deadline extended from February 2023 to December 2024 to accommodate an increased 200MW of quota,” it said.
Source: The Star
