Solarvest Group Berhad - Turning Sunlight into Investment
Mon, 12-Aug-2024 08:04 pm
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

1.95

Recommendation

Buy

Investment Highlights

  • Proxy to government’s RE initiatives. We see Solarvest as a frontrunner poised to benefit from government RE initiatives. This is backed by (i) established track record of having completed 1.2GW the highest number of installed solar PV systems among peers (ii) active participation in government projects, such as utility-scale solar and green hydrogen initiatives, solar-powered electric bus charging stations in Kuching, and the installation of solar systems at over 300 PETRONAS stations nationwide (iii) consistently secured c.20.0% of EPCC jobs from LSS1, LSS2, and LSS4 projects, and (iv) commands c.40.0% market share in C&I rooftop solar. We believe these achievements enhance Solarvest's bidding success rate and solidify its position as a leading contender for future RE initiatives.
     
 
  • Building a Solar Empire. Since listing, Solarvest has been aggressively expanding RE portfolio to achieve recurring income of 30.0% of the annual revenue by 2027. YTD, Solarvest RE portfolio totaling to 199.0MW which comprise (i) 87.2MW 80% asset ownership from Powervest Programme, (ii) 67.3MW solar plants under LSS4, (iii) 43.5MW solar assets under CGPP and (iv) 1.0MW solar power plant from REPPA. We anticipate this segment would further improve by RM29.8m and RM41.1m in FY25F and FY26F respectively from RM12.0m in FY24E upon projects completion.
 
  • Made possible with maximum flexibility. One of the uniqueness of Solarvest is their in-house solar financing Powervest, to facilitate solar PV adoption from C&I customers. Under the programme, Solarvest would partly or fully finance all of the Solar PV systems with offering zero upfront cost and free of maintenance as key selling points. To date, Solarvest has secured 109.0MW of asset development under the program. This strategic approach not only helps establish a long-term recurring income base but also enable the Group to leverage onto its solar assets for cash liquidity as required.
 
  • CGPP kick starting. We anticipate CGPP construction works would kick start in the near-term, with expected agreements to be finalised in the 3Q2024. Currently, Solarvest is in tendering process for 443.4MW, which could yield c.RM1.0bn of EPCC job flows. From an asset ownership perspective, we expect that CGPP will also bring better margins, as players are free to choose their own offtakers, allowing for better pricing compared to the LSS auction mechanism. We gathered Solarvest’s tariff ranged between 25-27 sen which is decently higher than LSS4 bids range 18-20sen/kWh for installations between 30.0MW to 50.0MW. Along with reduction of solar module prices, we believe CGPP could generate high single digit IRR.
 
  • Next wave of orders replenishment from LSS5. The recent roll out of fifth cycle bidding process for 2.0GW LSS5 represents another catalyst for order replenishment to industry players. We reckon LSS5 could potentially generate RM5.0bn in contract value would keep EPCC players busy until year 2026. We anticipated announcement of winners will release as early as end-2024 as LSS COD is set by end-2026. Based on track records, Solarvest success capturing an average c.20.0% EPCC jobs from LSS1, 2 and 4, we expect similar win rates for LSS5 as well.
 
  • RE remains a favourable theme in Malaysia. Solar power plays a pivotal role in achieving net zero greenhouse gas emissions by 2050. In order to achieve 59.0GW, government has consistently roll out various initiatives such as the 2.0GW LSS5, 0.4GW NEM, SolaRIS, SolarBoleh, GITA, and among others, driving accelerated installation of solar panels across Malaysia. Recently, a pilot auction of 100.0MW of RE, requiring 450.0MW of solar generation capacity along with 1.5GW of battery storage (75.0% load factor), highlights the importance of solar energy. We believe Solarvest is well-positioned among RE players to benefit from the promising outlook.
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