ELRIDGE Energy Holdings Berhad - Leaning on the spread
Wed, 26-Aug-2026 12:06 am
by Research Team • Apex Research

Counter

ELRIDGE (0318)

Target Price (RM)

N/A

Recommendation

Not Rated

·   Elridge Energy Holdings Berhad manufactures biomass fuel products through Bio Eneco Sdn Bhd, particularly palm kernel shells (PKS) and wood pellets.

·   Key customers include biomass fuel trading companies and end-users across Malaysia, Indonesia, Singapore, Thailand and Japan.

·   ELRIDGE is well positioned to capture further biomass demand growth, with diversification away from the Japanese markets, with offtake agreements signed with Berkana Power in Thailand in January 2026 increasing its customer demographic outside Japan.

·   We expect earnings growth to be volume-led, with capacity rising to 1.92m MT by FY2026 following Kuantan 2, while Lahad Datu is deferred to FY2027.

·   We assigned a 23.6x P/E multiple based on ELRIDGE’s one-year average P/E, to our FY27F core EPS of 4.49 sen, arriving at a Fair Value of RM1.06.

 

Investment Highlights

Qualification Is the Moat, while scale earns contracts. ELRIDGE is Malaysia's only listed pure-play PKS producer. While PKS processing requires standard manufacturing licences, the Group's real competitive advantage lies in its ability to supply Green Gold Label (GGL)-certified palm kernel shells with fully traceable and sustainable sourcing. Combined with customer qualification cycles that typically span one to three years, this creates a meaningful barrier to entry, particularly in Japan where long-term relationships underpin contract awards.

 

Projected Future Expansion. We expect earnings growth to remain volume-led, supported by capacity expansion to 1.92 million MT upon commissioning of Kuantan 2 in FY2026. The planned Lahad Datu facility is expected to provide a further expansion leg in FY2027. The secured offtake with Berkana Power Thailand (100,000 MT p.a., signed January 2026 for ten shipments) marks a deliberate push to diversify beyond Japan and build a regional presence in the Thai market. The agreement reprices every three months, with purchase orders placed at least 90 days before first loading, adding contracted volume as the new capacity comes online.

 

Demand Is Long-Dated but Closed. Japan's Ministry of Economy, Trade and Industry (METI) has excluded woody biomass of 10MW and above from the FIT and FIP schemes from FY2026 and has approved no new projects since 2017. The current approved fleet of 900 plants against 586 operating carries 20 to 25 year lives, making the pool durable but finite. Growth must come from displacing competing supply, which is currently helped by Indonesia’s CPO-linked export levy, increasing appeal for alternative PKS supply.

 

Activated Carbon Optionality. ELRIDGE is evaluating activated carbon, a downstream product derived from processed palm kernel shells (PKS), as part of its strategy to move further up the biomass value chain and capture higher processing margins. While still at an early stage with no near-term earnings contribution assumed, successful commercialisation could provide a meaningful long-term growth opportunity.

 

RM1.06 Fair Value on 23.6x Forward P/E. We value ELRIDGE at RM1.06, applying 23.6x, its one-year average blended forward P/E, to our FY27F core EPS of 4.49 sen. As ELRIDGE has no peers, we find that valuing it at an average blended multiple of 23.6x to be appropriate. Re-rating hinges on converting the remaining MOUs into binding offtake and commissioning the Kuantan 2 plant on schedule.

 

Key risks include: policy-dependent demand, customer and receivable concentration, weak cash conversion, spread reversal, and execution/upstream competition.

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