• MYR0.66 FV based on 15x FY24F (Mar) P/E. An experienced solar EPCC main- and sub-contractor, Sunview is poised to ride on Malaysia’s growing adoption of renewable energy (RE) and the Government’s commitment to achieve a higher RE mix. Its strong orderbook (6.5x cover of FY22 revenue) provides earnings visibility and continues to drive earnings growth. Over the next two years, Sunview is also striving to double its recurring income base from 18 solar assets. Currently valued at 11x FY24F P/E, this counter is an attractive RE play, in our view.

• A solar EPCC contractor and solar asset owner. Sunview is mainly an EPCC contractor that derives the bulk of its revenue by providing EPCC services on: i) Utility-scale large-scale solar (LSS) projects, and ii) solar photovoltaic (PV) facilities for commercial and industrial (C&I) clients. It also owns solar PV facilities on client rooftops, and operates them for a fixed concession period under power purchase agreements (PPA). Currently, it owns 18 solar PV facilities with a collective installed capacity of 7.74MWp, which currently generates <2% of revenues. Sunview plans to double its installed capacity to c.15MWp within two years, and looks to continue building or acquiring more solar assets, using a mix of equity and debt funding.

• Beneficiary of Malaysia’s RE commitment. As the Government is targeting for 31% of Malaysia’s installed capacity to be made up of RE by 2025, these efforts will likely translate to more of such projects that Sunview can capitalise on. With a reputable track record and its status as a listed company, it is well- positioned to win more LSS contracts, in our view. The group should also benefit from the growing demand for solar PV facilities from C&I clients, fuelled by: i) Growing ESG awareness and a desire for a higher RE mix to be ESG-compliant; and ii) potential cost savings from using solar energy, given the possible hike in electricity tariff rates in 2023. Sunview also aims to venture into the EPCC of biogas facilities in the near future.

• Strong demand for solar power helps to replenish orderbook. As of end- September, it had an unbilled orderbook of MYR644m, providing a 6.5x cover of FY22F revenue. We forecast a 3-year earnings CAGR of 40%, driven by its current orderbook and future project replenishments. While margins have softened YoY in 1HFY23 on the back of larger LSS contributions, we think these could gradually inch up as solar panel prices start to ease, and as Sunview procures certain discounted P-type solar cells in the market.

• Valuation. We ascribe a P/E of 15x on FY24F (Mar) EPS to arrive at our fair value of MYR0.66. The 15x forward P/E is the same as what we ascribed to Samaiden (SAMAIDEN MK, NEUTRAL, TP: MYR0.76), and is at a premium to the Malaysian utility peer 2023 P/E average of c.12x – which is justified, given its relatively brighter growth prospects. Key risks include the inability to secure more projects, and a rise in solar panel prices, which could erode margins and delay projects.

Source: RHB Research - 5 Dec 2022