UUE Holdings Bhd - Initial Foray into the Solar Sector
Wed, 04-Jun-2025 06:47 am
by Tan Sue Wen • Apex Research

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UUE (0310)

Target Price (RM)

0.83

Recommendation

Buy

  • UUE is collaborating with Mr. Daryl Lai Yit Sheng in a 60:40 joint venture in Enerxite Sdn Bhd as an initial foray into the solar sector. 

  • We hold a Neutral view on the development due to lack of proven track record. 

  • Our forecasts remain unchanged, as we do not anticipate material impact on earnings from this venture for now.

  • Reiterate BUY recommendation with an unchanged target price of RM0.83, based on 15x FY27F EPS of 5.5sen, and appraised with a three-star ESG rating.

 

Subscription details. UUE is collaborating with Mr. Daryl Lai Yit Sheng (DLYS) in a 60:40 joint venture in Enerxite Sdn Bhd, to undertake EPCC of solar photovoltaic systems and investments in solar power plants. Prior to this, Enerxite is a wholly owned subsidiary of UUE with issued and paid-up capital of RM10, comprising 10 ordinary shares. Under the Subscription Agreements, UUE will subscribe for 599,990 new shares in Enerxite for a cash consideration of RM599,990, while DLYS will subscribe for 400,000 new shares for a cash consideration of RM400k. Upon completion, UUE will hold a 60% stake in Enerxite, with DLYS holding the remaining 40%. UUE will act as the primary capital contributor and corporate owner, providing strategic direction and corporate governance oversight. Meanwhile, DLYS will contribute technical expertise and industry knowledge. The subscription is expected to be completed within one month of the agreement becoming unconditional. UUE’s investment, funded through internally generated funds, represents a minor capital outlay relative to its RM25m cash balance at end-FY25.

 

Our Take.We hold a Neutral view on UUE’s foray into the solar sector. UUE’s venture into solar EPCC offers diversification and potential earnings uplift for the Group. While DLYS brings technical expertise that could provide leverage, the solar EPCC segment, particularly the large-scale solar segment, is highly competitive and dominated by established players. Without a proven track record, it may be challenging for Enerxite to secure larger scale projects initially. Enerxite is likely to focus on the rooftop solar market, where barriers to entry are lower and project sizes are typically smaller. As such, we do not expect material earnings contribution from this venture in the near term until the Group establishes a credible track record.

 

Earnings revision. We are maintaining our earnings forecast at this stage, as we do not anticipate material impact on earnings from this venture.

 

Valuation. Reiterate BUY recommendation with an unchanged TP of RM0.83 based on 15x FY27F EPS of 5.5sen and a three-star ESG rating. We continue to favour UUE for its (i) specialisation in high-margin niche HDD solutions, (ii) strong positioning as a key beneficiary of TNB’s grid upgrade plans, supported by its established relationship with major customers, and (iii) strategic expansion into subsea development, which is anticipated to drive future margin expansion.

 

Risks. Heavy reliance on its top three customers. Risk of subcontractor non-performance. Inability to secure new contracts.

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