• Maintain BUY with new MYR1.46 TP (SOP) from MYR1.55, 14% upside. Samaiden Group’s 1HFY24 (Jun) earnings missed expectations despite signs of improvement from the previous quarter. We believe the stalled biomass EPCC projects contributed to the weaker-than-expected results. Despite the setback, we maintain a positive outlook due to Malaysia's commitment to renewable energy (RE), particularly the strong push for solar energy.

• Missed expectations. 1H24 core earnings of MYR6m (+19.5% YoY) missed ours and consensus’ expectations, making up 25% and 28% of full-year forecasts. Although we anticipate earnings to pick up in next quarters with major progress from Large Scale Solar 4 (LSS4) EPCC jobs, it will not be as strong as anticipated due to slow progress of the EPCC biomass plants (awarded in 2020 and 2021). The biomass facilities development is delayed while project owners resolve their financial terms, per management guidance.

• Results review. 2QFY24 core earnings increased to MYR3.2m (+11.3% QoQ, +22.1% YoY) on higher revenue (+5.8% QoQ, +21.4% YoY) and operating income (+36.7% QoQ, >+100% YoY). This was slightly offset by higher administrative (+18.8% QoQ, +34.7% YoY) and interest costs (+5.5% QoQ, +4.3% YoY). On the better quarter performance, 1HFY24 core profit saw a 19.5% rise to MYR6m from 1HFY23’s MYR5m.

• Outlook. As of Dec 2023, the group’s orderbook stood at MYR358.2m – +2.1% from the previous quarter’s MYR350.7m. This excludes the joint MYR100m solar EPCC contract for the development of a 50MWac ground- mounted solar photovoltaic (PV) plant at Kulim Hi-Tech Park (KHTP), which Samaiden – in partnership with JS Solar – won in January. The orderbook composition: 25% commercial and industrial (C&I), 35% LSS4, 35% biomass, and 5% others. We expect a stronger 2H as Samaiden looks to recognise its LSS4 orders by FY24. Moving forward, the eminent Corporate Green Power Programme (CGPP) tenders and the remaining 450MWac KHTP solar projects will help replenish the group’s orderbook. Further supporting orderbook growth are the National Energy Transition Roadmap (NETR) as well as the recently announced Integrated Clean Energy (TBB) programmes.

• Reiterate BUY. We revise down our earnings 6-18.2% for FY24-26F on account of the EPCC biomass plant delay. We arrive at a new SOP-derived TP of MYR1.46 (Figure 2) as we i) Cut earnings, ii) peg 24x P/E to fully diluted CY24 EPS – a 20% discount to Solarvest’s (SOLAR MK, BUY, TP: MYR1.53) c.30x, given the latter’s larger asset base and bigger regional presence, and iii) impute its 7MW biomass plant (DCF-based on 7.8% WACC). Our TP also includes a 6% ESG premium, given Samaiden’s 3.3 ESG score is above the country median of 3.0. Key risks include discontinuation of solar incentives, competition risks, and higher-than-expected project costs.

Source: RHB Research - 22 Feb 2024