SAMAIDEN reaffirmed its guidance for stronger quarters ahead driven by a sizeable LSS4 project and margin expansion from falling solar panel prices. The recently unveiled LSS5 is expected to generate about RM5b worth of EPCC jobs for the industry, keeping players busy until 2028. We maintain our forecasts, TP of RM1.51 and OUTPERFORM call.

We came away from SAMAIDEN’s post-results briefing feeling positive on its outlook. The key takeaways are as follows:

1. SAMAIDEN reaffirmed its guidance for stronger quarters ahead driven by its key job, i.e. a 50MW LSS4 project. We anticipate an additional earnings kicker, i.e. margin expansion arising from falling solar panel prices.

2. SAMAIDEN expects solar EPCC jobs under LSS5 to hit the market in 2HCY25. It is eyeing at least 10% of total contracts. Recall, pursuant to the National Energy Transition Roadmap (NETR), the Energy Commission (EC) is embarking on LSS5 with a quota of 2GW and it will issue the request for proposal (RFP) documents from Apr 2024. We estimate that this initiative will generate about RM5b worth of projects for the solar EPCC sector, keeping players busy until 2028.

3. SAMAIDEN’s current tender book stands at RM1.5b, comprising largely potential jobs from the Corporate Green Power Programme (~c.27%). At present, its outstanding orderbook stands at RM358m (LSS4: 35%, C&I: 25%, biomass: 35%, Others: 5%), which could keep it busy for the next 18 months.

Forecasts. Maintained.

Valuations. We also maintain our TP of RM1.51 based on SoP valuation, valuing its EPCC segment at 30x fully-diluted FY25F EPS of 4.9 sen, in line with the average forward PER of peers such as SVLEST (OP; TP: RM1.47) and SUNVIEW (Not Rated) and DCF for its CGPP and biomass assets. Our TP imputes a 5% premium given its 4-star ESG rating as appraised by us (see page 4).

Investment case. We continue to like SAMAIDEN for: (i) the bright outlook of the RE sector in Malaysia, underpinned by the government’s goal of RE making up 70% of total generation mix by 2050, (ii) the increased commercial viability of solar power projects on falling solar panel prices and the export potential of RE, (iii) its position as one of the top players in the local solar EPCC market, (iv) its ability to provide endto-end solutions, including financing, and (v) its proven track record in delivering projects on time and within budget. Maintain OUTPERFORM.

Risks to our call include: (i) the government dials back on RE policy, (ii) influx of new players in the EPCC space, intensifying competition, (iii) project execution risks including cost overrun and project delays, and (iv) escalating cost of inputs, particularly, solar panel and labour.

Source: Kenanga Research - 26 Feb 2024