Solarvest's return? Why is share price down almost 50% despite extremely bright outlook?

Solar or renewable energy (RE) is among the hottest industries to invest in because it offers one of the brightest outlooks in the current environment. In Malaysia, we have numerous government initiatives such as LSS, NEM, SARES and GITA/ GITE which are aimed to push RE generation mix to 31% by 2025. For solar specifically, installed capacity is expected to triple from ~1GW in 2020 to ~3GW in 2025 (25% CAGR), creating RM4-5b worth of EPCC jobs over the next 5 years.

From LSS4 alone, Solarvest is confident of getting 200-300MW (or RM600-800m) worth of jobs by end of this year, plus 100MW (or RM200-300m) from commercial & industrial segment. This means Solarvest has around RM1b potential jobs in the pipeline, which is 4-5 times more than last year’s revenue of RM224m.

So why has Solarvest’s share price dropped almost 50% from the peak even though solar industry outlook remains so robust? This is likely because of...




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DISCLAIMER: The note above is purely facts sharing for educational and discussion purposes. We do not recommend BUY/SELL actions. We're also invested in the stock(s).

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VSTECS: Moving to The Cloud

Trading Buy with FV of RM3.60 (27% upside). Enterprise segment (2x higher GPM than ICT distr.) will be a key earnings driver as corporations scramble to upgrade critical back-end infra to (i) tighten network security, (ii) support workforce mobility and (iii) quicken data processing speed. This leads to massive increase in web traffic and a surge in demand for cloud/data center software and hardware. As such, VSTECS even expanded its portfolio offering with ~5 new enterprise brands in 2020 and is in talks to bring in Alibaba Cloud which could serve as another share price catalyst.

Lead time for laptop/tablet doubled due to immense demand from the WFH trend and is expected to remain elevated following the PERMAI (tax relief on laptop purchase) and CERDIK (free laptop for 150k students) initiatives.

As a potential beneficiary of the RM1.16b NIIS project by IRIS (customer), VSTECS’s current fwd PE of 12.5x serves as a laggard play to the tech sector’s monster rally. Our Trading Buy with FV of RM3.60 is based on FY21E PER of 16x.

(By Kenanga)

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