Samaiden Group Berhad - Bagged 99.99MW Solar Farm Under LSS5
Tue, 31-Dec-2024 07:46 am
by Tan Sue Wen • Apex Research

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SAMAIDEN (0223)

Target Price (RM)

1.71

Recommendation

Buy

Summary

  • Won the bidding under Package 3 of LSS5 for a 99.99MW solar plant in Kedah, aligning with Samaiden’s target of achieving 100MW in asset ownership under the LSS5 programme.

  • Brighter prospects ahead, with EPCC job flows from 2GW LSS5 expected to commence in 2H CY2025, offering strong earnings visibility over the medium term.

  • SOTP valuation revised upward by 3.0% to RM1.71, reflecting contributions from LSS5 solar assets, with a three-star ESG rating assigned.

 

LSS5 win. Samaiden has won the bidding under Package 3 of LSS5 for a 99.99MW solar plant in Pasir Mas, Kelantan. The plant, expected to be completed by October 2027 (Q2FY28), will supply electricity to Tenaga Nasional Berhad (TNB) under a 21-year Solar Power Purchase Agreement (SPPA).

 

Our Take. This aligns with Samaiden's target of achieving 100MW in asset ownership under LSS5. The potential capex for the plant is estimated at approximately RM200m, reflecting current solar module prices at a historic low of USD0.09/watt. Assuming an 80:20 debt-to-equity financing structure and industry estimates place bid tariffs between 13 sen/kWh~16 sen/kWh, the project is anticipated to deliver a mid-single-digit IRR. We do not foresee any major challenges in regards to project execution, given Samaiden's low gearing ratio of 0.03x as of 30 September 2024, which is highly manageable.

 

Outlook. While the EC has not disclosed the full list of winners, sources indicate that Packages 3 and 4 have been fully allocated, totalling 1.5GW. EPCC job flows are anticipated to commence in 2H 2025, consistent with the industry-standard timeline of approximately six months post-award notification. Couple with 800MW of CGPP, these developments are expected to generate up to RM7.2bn in EPCC jobs, providing significant opportunities for order book replenishment among RE pure-plays and offering strong earnings visibility over the medium term. To recap, Samaiden aims to secure at least 10% (200MW) of the 2GW EPCC opportunities under LSS5, translating to an estimated RM600m in job opportunities. We believe this is achievable, as it aligns with Samaiden’s proven track record of capturing a 15% market share in previous LSS cycles. As of 30 Sep 2024, Samaiden's unbilled order book stood at RM521.2m (CGPP 45%, Bioenergy 35%, C&I 16%, with the remainder from others), representing 2.3x its FY24 revenue of RM227.2m.

 

Earnings revision. Earnings have been revised due to housekeeping adjustments. We noted that there is no earnings contribution from the LSS5 solar plant over the foreseeable future, as it will only be reflected in FY28.

 

Valuation & Recommendation. We revise our SOTP valuation upward by 3.0% to RM1.71 (from RM1.66), reflecting housekeeping adjustments and improvements from the LSS5 solar assets, based on a DCF valuation with a Ke (cost of equity) of 13.9% (LSS5). We have also assigned a three-star ESG rating (0% discount/premium) to the potential upside. Our positive view on Samaiden is reinforced by its (i) expertise in ground-mounted solar PV projects, (ii) industry-leading low gearing ratio of 0.03x as of 1QFY25, and (iii) strategic focus on bioenergy solutions, which sets it apart from other solar EPCC players.

 

Risk. Increase in solar module costs. Inability to complete projects in time. Intense market competition.

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