KEY INVESTMENT HIGHLIGHTS

• Much lower revenue for the quarter as revenue from materials delivered to client recorded upon delivery in previous quarter
• Outstanding order book of RM196.9m, active tender book of RM2.5b
• Margins to gradually improve with focus on more rooftop projects
• Maintain BUY with a revised TP of RM0.75

A case of revenue recognition. The sudden plunge in Sunview's revenue for 1QFY25 was as we expected, due to the recognition of revenue upon delivery of solar modules in the previous quarter for the group's ongoing large-scale solar (LSS) projects. In a meeting with management yesterday, they explained that revenue was recognised upon the delivery of materials even before installation, as the risk and reward (of the materials) have been handed over to the respective clients.

For the latest quarter, revenue dipped -65.5%yoy and -63.6%qoq to RM37.6m. Part of this was revenue for installation works and the other half came from commercial and industrial (C&I) rooftop solar projects.

C&I rooftop jobs to drive margins improvement. Management expects to gradually grow its C&I rooftop jobs, which will improve its profit margins in the long run. C&I rooftop projects are able to generate GP margins in the low to high teens as compared to LSS projects which are in the mid-single digit.

Actively tendering. Out of the group's unbilled order book of RM196.9m, slightly north of RM100m are LSS projects. This includes the RM51.9m Corporate Green Power Programme (CGPP) EPCC contract that it secured from Cenergi Solar Kuala Ketil Sdn Bhd which was officially formalised yesterday. Sunview's active tender book stands at RM2.5b, among which comprises RM650m of CGPP tenders, RM200m of rooftop projects, USD80m of projects in Eastern Europe and a RM700m Batery Energy Storage System (BESS) project. Management is confident of securing another RM150m of CGPP EPCC jobs soon.

Updates on overseas projects. Sunview is currently undertaking preliminary works for the RM79.5m EPCC project that it secured in Bulgaria for a 20MW solar PV power plant. It expects to begin construction works in Oct-24 or Nov-24. As for its Uzbekistan projects, management said they have received the draft power purchase agreement (PPA). The group is currently reviewing the PPA and aims to ink it by Oct-24. Sunview had in Jul-24, entered into a heads of terms agreement with Uzbekistan via the Ministry of Energy to develop two solar PV plants with a total capacity of 600MW.

Earnings estimates. We slash our earnings estimates for FY25E/FY26F by -25.7%/-29.0% as the remaining LSS4 projects are now at its tail end, and the delay in rollout of CGPP-related EPCC jobs.

Source: MIDF Research - 3 Sep 2024