Samaiden Group Berhad - Earnings growth prospects intact
Fri, 30-Aug-2024 07:05 am
by Tan Sue Wen • Apex Research

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SAMAIDEN (0223)

Target Price (RM)

1.66

Recommendation

Buy

Summary

Samaiden’s 4QFY24 core net profit rose +12.7% qoq and +55.3% yoy to RM4.6m, bringing FY24 core net profit to RM15.3m, which exceeds our expectations at 110.9% and the consensus expectation at 104.6%.

The Group currently holds an order book of RM313.5m, with anticipated growth from upcoming CGPP, LSS5, NEM, and CRESS programmes.

We maintain our earnings forecast for both FY25F and FY26F and reaffirm our BUY recommendation, with unchanged target price of RM1.66 based on a SOP valuation.

 

Results Review

  • Results review. 4QFY24 core net profit rose to RM4.6m (+12.7% qoq, +55.3% yoy), driven by better margins in the C&I and biomass projects. C&I projects are usually carried out through direct negotiations that commands much better margins against LSS projects via open tenders. Revenue for the quarter slipped -23.7% qoq to RM57.2m as most LSS projects neared the tail end of completion. The Group declared a first interim dividend of 0.70sen/share in 4QFY24.

  • Exceeded expectations. Samaiden's FY24 core earnings exceeded our expectations, accounting for 110.9% of our full-year estimates and 104.6% of the consensus estimates. The outperformance was mainly due to better-than-expected margins in C&I projects. 

  • Operations Highlights. During the quarter, EBIT margin improved significantly to 15.0%, from 8.1%, driven by executive higher value of projects that commands better project margins. Consequently, core net profit margins improved to 8.1%, from 6.6%. We believe this improvement is also partly due to the deflation in solar module costs, which are currently at a historic low of USD 0.10/watt.

  • Solar outlook. To achieve 70% RE installed capacity, the government is required to consistently roll out an average 2.2GW of RE capacity per annum. Coupled with the 2GW LSS5, 800MW CGPP, 400MW NEM along with the recent introduction of CRESS, we estimate these initiatives could create c.RM8bn in job opportunities for Samaiden, potentially keeping the Group busy until 2028.

  • Bioenergy outlook. Bioenergy remains a strategic option for achieving Malaysia's green energy goals, supported by i) the country's abundant agricultural residues, ii) the focus on biomass co-firing in NBAP and NETR, iii) eligibility for the lowest SAC rate of 25 sen/kWh under CRESS, iv) and the goal of reaching 1.4GW in generation capacity by 2050. Coupled with the recently announced 190MW FiT quota for non-solar RE sources, we believe Samaiden is well-positioned to ride the biomass wave.

  • Outlook. Samaiden is equipped with an orderbook of RM313.5m (slightly lower against RM354.3m in 3QFY24), which is equivalent to 1.3x FY24’s revenue. Near-term growth is expected to stem from CGPP tenders, where the Group could secure RM350m in EPCC contracts. This will likely be followed by contributions from the 2GW LSS5, with shortlisted bidders expected to be announced in 4Q24. Separately, 190MW FiT for non-solar, CRESS, and additional 450MW NEM quota, further cement future orderbook replenishment outlook, potentially keeping Samaiden busy until 2028.

  • As of 4QFY24, Samaiden remains well-positioned with a strong financial foundation, supported by i) a net cash position of RM123.8m, ii) a low net gearing ratio of 0.1x, and iii) RM1bn in IMTN and RM0.5m in ICP, enabling the Group to undertake large-scale projects.

  • Valuation. We make no change to our earnings forecasts for now, pending granularity from upcoming post-results analyst briefing. Maintain BUY recommendation for Samaiden with an unchanged target price of RM1.66 based on SOP valuations, implying 23x P/E to FY26 EPS.

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

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