RE sector generating investor interest
04 Jul 2024
Amid the global push to sustainability, the renewable energy (RE) sector will continue to grow rapidly, generating investor interest.
In Malaysia, the RE sector is expected to see further contract rollouts, the launch of a third-party-access model (TPA) and export refinements which could benefit companies operating in this sphere.
This led to Hong Leong Investment Bank (HLIB) Research to retain its “overweight” stance on the country’s RE sector.
“We like the sector riding on strong structural themes as well as positive earnings growth cycle. Key catalysts include contract rollout, TPA, fresh RE quotas and export news flow,” the brokerage wrote in its report yesterday.
Further, it said, the data centre pipeline could accelerate decarbonising goals under the National Energy Transition Roadmap (NETR), adding the sector would continue to benefit from large-scale solar projects, net energy metering and the low-carbon energy generation programme under the new enhanced dispatch agreement post corporate green power (CGPP) programme.
As such, HLIB Research noted that RE stocks under its coverage, namely Solarvest Holdings Bhd and Samaiden Group Bhd, were expected to chart positive earnings growth cycle.
Ascribing “buy” calls to both, HLIB Research puts its target prices at RM2 for Solarvest and RM1.44 for Samaiden.
It noted that both stocks had performed well during the first half of 2024, recording positive year-to-date returns of up to 32.2% for Solarvest and 22.7% for Samaiden.
HLIB Research attributed the share price performance gap to earnings execution, as Samaiden missed the second and third quarters earnings for its financial year ended June 30, 2024.
“This is against a backdrop of stronger replenishment performance in the first half of 2024 (1H24) by Samaiden, while Solarvest’s contract pipeline is 2H24 heavy,” it said. It said the 800MW CGPP programme was expected to produce RM2bil to RM3bil worth of engineering, procurement, construction and commissioning (EPCC) opportunities, though estimates could still vary due to fluctuating costs.
“Barring any extension of time granted, the Energy Commission has stipulated for CGPP projects to meet commercial operation date by end-2025 and we anticipate higher urgency on all parties to close the deal. We expect Solarvest to emerge as the biggest winner with its active involvement in 443.4MW of EPCC quotas, worth an estimated RM1bil,” it said.
It stated that the government would roll out the TPA in 2H24 to cater to the burgeoning data centre emissions offsetting needs.
Source: The Star
