Pekat Group Berhad
Tue, 03-Sep-2024 11:36 am
by Tan Sue Wen • Apex Research

Counter

PEKAT (0233)

Target Price (RM)

1.20

Recommendation

Buy

Summary

  • Pekat secured a 10-year PPA with Sun Investments for a project involving a 1,727 kWp solar plant with a BESS capacity of 1,398 kWh, featuring a lucrative tariff rate of USD 0.27/kWh.

  • We expect this project to positively impact the Group’s bottom line in the long run. 

  • We maintain our BUY recommendation with an unchanged target price of RM1.20, based on SOP valuation.

 

Company Update

  • Secured New PPA. Pekat’s wholly-owned subsidiary, Solaroo RE (Maldives), has secured a 10-year PPA with Sun Investments. Pekat will undertake the EPCC of the solar PV systems and act as the investor, asset owner, and renewable energy electricity producer.

  • Project details. The project includes a 1,727 kWp solar PV plant with a BESS capacity of 1,398 kWh, located at Sun Siyam Vilu Reef Maldives, Meedhufushi, Dhaalu Atoll, Maldives. COD is expected within 12 months of site possession. Contract value for the project is USD 6.9m, with a tariff rate of USD 0.27kWh, expected to generate around 25.45/mkWh electricity over the 10-year period.

  • Positive Contribution in the long run. We expect the project to be completed by next year, with meaningful contributions from the power plant beginning in 2026. This is anticipated to positively impact Pekat’s earnings over the next 10 years.

  • Valuation. We make no changes to our earnings forecast as we anticipate the development will not affect our projected figures in the immediate future. We maintain our BUY recommendation on Pekat with an unchanged target price of RM1.20, derived from SOP valuations.

  • Moving forward, we anticipate most job inflows will stem from the award of CGPP contracts, with the Group targeting to secure RM200m to meet the tight COD deadlines by 2025. Separately, the Group is finalising a SPA for a 60% stake in EPE Switchgear, marking its venture into the power sector. These two developments are expected to be the main drivers of foreseeable earnings growth.

  • Risks. (i) EPE acquisition took longer than expected, (ii) reversal of solar module prices and, (iii) CGPP project recognition was slower than anticipated and (iv) intense market competition.
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