Solarvest Holdings Berhad - Another CGPP job award
Mon, 25-Nov-2024 07:16 am
by Tan Sue Wen • Apex Research

Counter

SLVEST (0215)

Target Price (RM)

1.91

Recommendation

Buy

Summary

  • Secured a RM142.0m CGPP contract for a 29.9MWac solar farm, boosting order book to RM828.3m, equivalent to 1.7x FY24 revenue.

  • This is a related-party transaction, where Solarvest holds a 33% effective stake in the awarded company.

  • Maintain BUY recommendation with an adjusted target price of RM1.91, post housekeeping of the share base to reflect warrant dilution.

     

Company Update

  • Third CGPP contract win. Solarvest, through its wholly owned subsidiary Atlantic Blue Sdn Bhd was awarded a RM142.0m contract from SM01 Sdn. Bhd. to develop a 29.9MWac solar farm in Kuala Muda, Kedah.

     

  • CGPP details. Construction will commence upon the fulfillment of two conditions: (1) approval from the EC for participation in the New Enhanced Dispatch Arrangement (NEDA), and (2) registration of the lease title by June 25. Conservatively, assuming construction begins after June 25, commercial operations is expected in 2026, assuming no delays. This is a related-party transaction, with SM01 Sdn. Bhd.’s ownership comprises Solarvest (33%), Shizen Malaysia (49%), and HSS Engineering (18%).

 

  • Boost to order book. This latest win bumps Solarvest’s outstanding order book to RM828.3m, equivalent to 1.7x FY24 revenue of RM497.0m. Assuming a 7.5% EBIT margin, the project is expected to generate RM10.7m in EBIT over its cycle, with peak revenue recognition projected in FY26.

 

  • Earnings revision. No changes to our earnings forecasts, as the contract win falls within our FY25F order book replenishment target of RM2.2bn, with CGPP expected to contribute ~RM750.0m (YTD: RM359.3m).

 

  • Valuation. We maintain our BUY recommendation with an adjusted TP of RM1.91, post housekeeping higher share base to reflect recent dilution from the issuance of ~5.5m warrants. Our valuation methodology remains unchanged, which is based on sum-of-parts (SOP). Looking ahead, momentum is expected to continue, driven by the 800MW CGPP and the 2GW LSS5, with shortlisted winners for LSS5 expected in the near future. 

 

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

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