Samaiden Group Berhad - Another contract win in LSS
Thu, 03-Oct-2024 07:33 am
by Tan Sue Wen • Apex Research

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SAMAIDEN (0223)

Target Price (RM)

1.66

Recommendation

Buy

Summary

  • Secured another new LSS contract for a 10MW solar project from Bahau Power, valued at RM39.2m, which we expect to generate RM2.4m in EBIT over its lifecycle.

  • This new contract bumps Samaiden’s outstanding order book to RM404.7m, equivalent to 1.8x FY24 revenue of RM227.2m.

  • We maintain our BUY recommendation with an unchanged target price of RM1.66, based on an SOP valuation.

     

Company Update

 

  • New LSS contract secured. Samaiden has secured a Letter of Award from Bahau Power Sdn Bhd for the development of a 10MW large-scale solar (LSS) project.

 

  • LSS project details. The LSS project, with a capacity of 10MW, is valued at RM39.2m and will be located in Bahau, Negeri Sembilan. The project is expected to be completed within 12 months to meet the COD by Sept 25, corresponding to 1QFY26. 

 

  • Orderbook update. This contract marks Samaiden’s latest win in LSS, raising its outstanding order book to RM404.7m, equivalent to 1.8x FY24 revenue of RM227.2m. We anticipate that revenue recognition will follow a similar pattern to previous projects, with a significant portion likely to be recognised by FY26F. Assuming a similar EBIT margin to the LSS4 average of 6%, the project is expected to generate RM2.4m in EBIT over its lifecycle.

 

  • Earnings revision. There are no changes to our earnings forecasts, as this contract win falls within our FY25F order book replenishment assumption of RM1.0bn.

 

  • Outlook. After securing two recent contract wins, we maintain our positive stance on Samaiden’s prospects. We expect momentum to continue, supported by (i) upcoming CGPP job wins, where we anticipate Samaiden capturing RM350m in orders, and (ii) at least 10% of EPCC jobs from LSS5, aligned with its historical market share in past LSS cycles. Separately, recent strengthening of the MYR is expected to improve project margins, particularly in the sourcing of solar panels, which account for c.20-35% of contract value.

 

  • Valuations. We maintain our BUY recommendation on Samaiden with an unchanged target price of RM1.66, based on SOP valuation. Current valuations remain undemanding, with stock trading at a PER of 26x, below the industry average of 30x. We remain optimistic about Samaiden’s prospects due to its (i) expertise in ground-mounted solar PV projects, (ii) lowest gearing ratio (0.05x as of FY24) among listed peers, and (iii) focus on bioenergy solutions, which differentiates it from other solar EPCC players.

 

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

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