• Keep BUY and MYR1.55 TP, 24% upside. We reiterate our positive stance on Samaiden’s outlook, after the group secured its second contract win for the year, reflecting its strong position in the renewable energy (RE) space. It now has a diverse portfolio of RE assets, including solar, biogas and, recently, a biomass facility. Samaiden's strategic investment across these varied assets positions it as a key player in Malaysia's drive towards a more sustainable future.

• A sizeable biomass project. Samaiden’s indirect wholly-owned subsidiary, Samaiden Biomass Energy, has received the Feed-in Tariff (FiT) approval certificate from the Sustainable Energy Development Authority (SEDA) Malaysia. This approval gives it the green light to construct and operate a biomass power plant in Tangkak, Johor. The plant will have an installed capacity of 7MW, and is set to supply a net export capacity of 6MW to Tenaga Nasional (TNB MK, BUY, TP: MYR11.80). The tenure for this power purchase agreement is 21 years and will take effect on 22 Jan 2027. The awarded FiT rate is MYR0.34/kWh.

• We maintain our earnings estimates for now, pending more details as Samaiden is still fine-tuning its costing (biomass plant capex is generally around MYR10-12m per MW) as funding structure for this new facility. Our back-of-envelope calculation suggests the biomass gas plant could roughly bring in earnings of MYR3-4m pa. Overall, management has guided for a double-digit equity IRR. On timeline, it is looking to achieve financial close and start construction works in 2H24. With regards to the EPCC contract on biomass plants won in 2020 and 2021, progress has been rather stagnant, as the project owners are resolving their own financing terms. Similarly, its biogas plant is being re-evaluated on cost optimisation terms, with management hoping to start construction soon.

• No change to our TP and stock recommendation. Our SOP valuation comprises: i) 24x FY24 P/E, which is at a 20% discount to Solarvest’s (SOLAR MK, BUY, TP: MYR1.53) c.30x – on account of the latter’s larger asset base and bigger regional presence, and ii) a DCF (WACC: 7.8%) for its 60%-owned biogas asset. Do note that there is potential upside to our outlook, since we have yet to bake in assumptions regarding its Corporate Green Power Programme assets and the newly secured biomass plant, as we await more details on these. Our TP includes a 6% ESG premium, based on its 3.3 ESG score (country median: 3 out of 4).

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

Source: RHB Securities Research - 31 Jan 2024