EXECUTIVE SUMMARY

We initiate coverage of Samaiden Group Berhad (SAMAIDEN) with a Buy rating and a sum-of-parts derived target price (TP) of RM1.30. Backed by a solid track record in the RE EPCC industry, SAMAIDEN stands as a key beneficiary of the Government’s aggressive drive to increase RE penetration under the National Energy Transition Roadmap (NETR), which requires a quadrupling in annual RE capacity installation over thenext 25 years to hit a targeted 70% RE penetration. Orderbook expansion is accelerating driven by upcoming EPCC awards for CGPP and LSS5 projects, which could easily double revenues by FY26. Recurring income is set to grow exponentially given multi-fold capacity expansion driven by recently secured CGPP and biomass FiT capacities. At 12.9x FY26 PER, SAMAIDEN trades at deep discount to historical mean of 20x; we see room for strong valuation re-rating as the sector enters an upcycle in RE capacity plant-up.

Investment Thesis

• SAMAIDEN is a prime beneficiary of the upcycle in Renewable Energy (RE) plant-up under NETR backed by a solid 11years track record in the RE engineering, procurement, construction & commissioning (EPCC) industry.

• The group is targeting to double revenues by FY26; orderbook is approaching a strong replenishment cycle driven by upcoming Corporate Green Power Program (CGPP) and Large-Scale Solar 5 (LSS5) project EPCC awards over the next 12 months. The group is targeting 200MWac EPCC contracts under the record-sized 2GW LSS5 auction, which could more than double orderbook should it materialise. As it stands, SAMAIDEN is sitting on RM404.7mn worth of projects, representing 1.8x its record FY24 revenue.

• Declining solar module prices, which have more than halved from peak levels in 2021, suggests room for margin improvement in upcoming new projects.

• SAMAIDEN is targeting to increase recurring income to 10% of revenue from <1% within the next 5 years, partly underpinned by 52MWac (30MWac net) of secured CGPP and Feed-in-Tariff (FiT) capacities scheduled to come online over the next 3 years.

RECOMMENDATION

We initiate coverage of SAMAIDEN with a BUY recommendation and a sumof-parts (SOP) derived target price (TP) of RM1.30/share, inclusive of a 3% ESG premium. Our SOP valuation pegs SAMAIDEN’s EPCC business at the stock’s historical mean PER of 20x. The EPCC division is still SAMAIDEN’s largest driver accounting for 85% of our gross SOP. The group’s 7MW Tangkak biomass power plant and 13.4MW CGPP plant are the next largest value drivers accounting for 6% and 5% of gross SOP respectively, while the remaining comprise of SAMAIDEN’s 30% owned 29.9MW CGPP plant and 60%-owned 1.2MW Bachok biogas plant. Our TP (pre-ESG premium) implies 20x FY25 PER (FYE June), which is at par to historical mean PER of 20x. We see room for valuation to re-rate higher towards +1SD (25x PER) as the sector enters an upcycle in RE capacity plant-up. A strong balance sheet with a net cash of RM124mn (accounts for 30% of market cap) underpins SAMAIDEN’s ability to keep up with the industry’s strong growth momentum.

Key Catalysts:(1) Further Award of CGPP EPCC Contracts.(2) Outcome of LSS5 bidding in November 2024 and EPCC contract awards thereafter.(3) CRESS project awards. Key risks are a sharp rise in raw material cost such as solar module and delays in project implementation.

Source: TA Research - 17 Oct 2024