• Reiterate BUY, new MYR1.58 SOP TP from MYR1.76 (14% upside). Samaiden Group's 9MFY24 (Jun) earnings fell short of expectations despite a stronger quarter, due to lower commercial & industrial (C&I) contribution and margin contraction. However, we remain positive on its outlook, given the opportunities arising from initiatives such as the National Energy Transition Roadmap (NETR), LSS-Peralihan Tenaga SuRia (LSS PETRA), and the Integrated Clean Energy (TBB) programme.

• Missed expectations. 9MFY24 core earnings of MYR10.1m (+45.9% YoY) missed our and consensus’ expectations, making up 51% of full-year forecasts. Despite the earnings boost from progress on Large Scale Solar 4 (LSS4) EPCC projects, the overall performance still missed expectations due to ongoing delays in the EPCC biomass plants and reduced C&I contributions.

• Results review. 3QFY24 core earnings rose to MYR4.1m (+29.6% QoQ, +115.7% YoY) on higher revenue (+53.6% QoQ, +68.3% YoY) and lower administrative expenses (-8.0% QoQ, -8.6% YoY). However, GP margin contracted due to weaker FX. Management expects improvements ahead with the easing of the USD. On the better quarterly performance, 9MFY24 core profit saw a 45.9% rise to MYR10.1m from 9MFY23’s MYR6.9m.

• Outlook. As of Mar 2024, the group’s orderbook stood at MYR354.3m, a 1.1% decline from the previous quarter’s MYR358.2m as LSS orders were recognised. The orderbook includes the 50MWac ground-mounted solar photovoltaic (PV) plant at Kulim Hi-Tech Park (KHTP), which has started construction and is expected to be completed by 1Q25. We anticipate a stronger quarter to close out the year, as Samaiden looks to recognise its LSS orders (c.70% completion) in FY24, along with contributions from the KHTP project. For its Corporate Green Power Programme (CGPP) asset, construction is expected to begin in 3Q25 as agreements are still being finalised. EPCC contracts should come in at the same time, helping to replenish its orderbook. The remaining 450MWac KHTP solar projects, along with the NETR, LSS PETRA, and TBB, should further bolster its orderbook.

• Reiterate BUY. We reduce our earnings forecasts for FY24-25 by 12-14.8%, but raise FY26F by 4.3% due to the prolonged delay in biomass EPCC jobs. We anticipate significant contributions to only start in FY26. We arrive at a new SOP-derived TP of MYR1.58 (Figure 2). Our SOP valuation comprises: i) 24x FY25F P/E on EPCC earnings, (ii) DCF (WACC of 7.8% for its 60%-owned biogas asset), and iii) DCF (WACC of 7.8% for its biomass asset). Our TP includes a 6% ESG premium, as Samaiden’s ESG score is above the country median. Key risks: Discontinuation of solar incentives, competition risks, and higher-than-expected project costs.

Source: RHB Research - 24 May 2024