Samaiden riding on green energy growth wave
13 Jul 2023
Samaiden Group Bhd, given its proven track record, is likely to continue seeing robust contract wins as more renewable energy (RE) initiatives are introduced, says RHB Research.
The group on Tuesday announced its fourth and largest large-scale solar four (LSS4) engineering, procurement, construction and commissioning (EPCC) contract win worth RM181.4mil.
“We continue to like the stock as a beneficiary of Malaysia’s strong demand for solar energy,” the research house said in a note to clients yesterday.
With the new contract, RHB Research said Samaiden’s order book stood at RM388mil, a 58% increase from the previous RM245.6mil reported in the third quarter of financial year 2023 (3Q23)
The group has received limited notice to proceed with site clearing, and expects installation and construction to start by the end of 1Q24 or early 2Q24.
Samaiden recently also secured a 20-year power purchase agreement with Yakult Malaysia for two solar facilities with a capacity of 496.26kWp and 212.22kWp.
“Although this brings minimal impact to earnings, it is testament to the growing demand for solar energy from commercial and industrial clients, stemming from higher tariffs and lower panel costs,” RHB Research pointed out.
The research house has raised its financial year 2024 (FY24) to FY25 forecast earnings by 22% and 20%, after increasing its order book assumptions by another RM300mil for this period.
“This is mostly driven by the upcoming Corporate Green Power Programme (CGPP),” it noted.
RHB Research, which reiterated a “buy” call on the stock, has a new target price (TP) of RM1.29 from RM1.05 previously.
However, the downside risks on Samaiden include the discontinuation of solar incentives, competition risks and higher-than-expected project costs, it added.
Kenanga Research, meanwhile, said the group’s latest job win has almost doubled its outstanding order book to RM388mil, which will keep it busy for the next three years. “We estimate that the contract will fetch a gross profit margin of 10% to 12%.
“The LSS4 projects now make up about 60% of its order backlog of RM388mil,” the brokerage firm added.
Kenanga Research also said the group’s tender book stood at about RM1bil at present, with about half coming from LSS4 projects, with the balance about equally split between projects under CGPP and commercial/industrial projects.
To reflect Samaiden’s higher order book, Kenanga Research has raised its FY24 forecast net profit by 8%. It has also raised the stock’s TP by 8% to RM1.24 from RM1.15 previously.
Kenanga Research said it likes Samaiden for the favourable policies and measures announced by the government recently.
This includes the lifting of the RE export ban, electricity hikes and rollout of the CGPP, Samaiden’s position as one of the top players in the local solar EPCC market, its ability to provide end-to-end solutions as well as its proven track record in delivering projects on time and within budget.
The risks to its call include the government dialling back on the RE policy, influx of new players in the EPCC space, intensifying competition, project execution risks and escalating cost of inputs, particularly solar panels and labour.
Source: The Star
