• Maintain BUY and MYR1.55 TP, 45% upside. Yesterday’s announcementof Samaiden Group’s first hydropower EPCC contract win came as apleasant surprise. We believe the group is strategically positioned tocapitalise on emerging opportunities within the renewable energy (RE)space given its involvement in not only the solar and bioenergy segments,but now also the hydropower sector.

• First foray into hydropower. Samaiden’s wholly owned subsidiary wasawarded the EPCC works contract in relation to the development of a2MWac small hydro (high head) facility at the Pelagat Forest Reserve inTerengganu. Awarded by Tesdec Hydropower (Tesdec), this MYR25.8mcontract marks a pivotal step for Samaiden, signifying its entry into thegrowing hydropower market and unlocking opportunities for future growthwithin the broader RE landscape. Given the complexity of construction vis-à-vis standard solar jobs, management has been strengthening the group’sinternal capabilities for such projects.

• Outlook. Samaiden’s orderbook currently stands at c.MYR340m – a slight3.1% decrease from the previous MYR350.7m reported in 1QFY24 (Jun).Although management has yet to finalise the project cost, GPM is guided tobe similar to those of solar projects, ie at c.15-20%. The development isanticipated to commence in Jun 2024 – this is subject to Tesdec securingfinancial close. Following the possession date given by the latter,construction is expected to take c.36 months. Apart from this, we will likelysee Corporate Green Power Programme or CGPP tenders to come in earlynext year, further supporting Samaiden’s orderbook and FY24-26 earnings.

• Maintain BUY. As the EPCC contract win is within our orderbookreplenishment assumptions, we maintain our earnings estimates. Our SOPderived TP is kept at MYR1.55, pegged to 24x FY24 P/E, ie at a 20%discount to Solarvest’s (SOLAR MK, BUY, TP: MYR1.53) c.30x – given thelatter’s larger asset capacity and bigger regional presence – and DCF(WACC: 7.8%) on Samaiden’s 60% biogas asset. We maintain upbeat onthe stock with its new venture into hydropower EPCC jobs. This is becauseit provides an edge for Samaiden, given its holistic involvement in RE. OurTP is inclusive of a 6% ESG premium based on its 3.3 ESG score, which isabove the 3.0 country median.

• Downside risks include discontinuation of solar incentives, competitionrisks, and higher-than-expected project costs.

Source: RHB Securities Research - 14 Dec 2023