Solarvest Holdings Berhad - Beefing up CGPP segment
Mon, 12-Aug-2024 04:41 pm
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

1.94

Recommendation

Buy

Summary

Secured five CGPAs with two global semiconductor leaders and a leading data center service provider under CGPP totaling 59.98 MW.

We expect most job flows to come from 800.0MW of CGPPpotentially adding close to RM1.0bn to its order book.

Upgraded to BUY recommendation with an unchanged target price of RM1.95 based on Sum-of-Parts (SOP) valuation.

 

Company Update

  • CGPP win. On 9th Aug 24, Solarvest secured five Corporate Green Power Agreements (CGPAs) with two global semiconductor leaders and a leading data center service provider under the CGPP, collectively for the offtake of 59.98MW of solar energy.

  • CGPP details. To recap, Solarvest secured three solar assets totaling 89.7MW under three different consortiums since Aug 23. This translates to 43.5MW after factoring in effective stake ownership. Targeted tariff ranges between 25-28sen/kWh, which is significantly higher compared to the LSS4 rate of 18-20sen/kWh. The plants are expected to begin construction promptly to meet the tight COD deadline set for the end of CY25.

  • Strong financial backing. We estimate capex for the plants to be RM66.0m factoring in the effective stake, expected to be financed through a mix of internal funds and equity. On Apr 24, Solarvest proposed a private placement of 6.0% of its base shares, with up to 50.0% of the proceeds allocated to its three CGPP plants. For the equity portion, Solarvest holds RM51.2m in net cash, with a gross gearing ratio of 0.23x (excluding project financing) as of 31st Mar 24, which remains at a manageable level.

  • More jobs in the pipeline. Over the near term, we expect most job flows to come from 800.0MW of CGPP. Solarvest is tendering for more than half of this capacity, potentially adding close to RM1.0bn to its order book. The Group’s tender book stands at 6.1GW (66.0% in Malaysia, 34.0% regionally), including the upcoming 2.0GW LSS5 and an additional 450.0MW under the NEM, which will keep Solarvest busy until 2028. Outstanding orderbook stood at RM242.0m as of 31st Mar 24.

  • Valuation. Following the recent share price retracement, valuations are turning more attractive and we upgrade our rating to BUY on Solarvest, with target price of RM1.94, based on Sum-of-Parts (SOP) valuation. While our earnings estimates remain unchanged, our target price was adjusted to reflect dilution from the warrant and ESOS exercises. We favour Solarvest as a frontrunner poised to benefit from government RE initiatives and its unique in-house solar financing. We believe Solarvest is well-positioned among RE players to capitalise on long-term growth potential from the NETR.

  • Risk. Reversal in solar module costs. Heavy reliance on government initiatives. Intense market competition.

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