SD Guthrie Bhd - Entered into term sheet for 21-year Bilateral Energy Supply Contract
Wed, 30-Sep-2026 06:53 am
by Ong Yong Jen • Apex Research

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SDG (5285)

Target Price (RM)

7.70

Recommendation

Buy

·   G3nerasi Kinta Sdn Bhd (GKinta), an indirectly 33.5%-owned company, entered into a term sheet for a 21-year Bilateral Energy Supply Contract (BESC) with a US-based multinational technology company. Project involves a minimum net capacity of 680MWac hybrid solar PV plant, 21-year offtake with gross revenue exceeding RM10bn to GKinta over the period.

·   No material near-term earnings impact, given the project remains at the development stage.

·   Maintain our BUY call with a target price of RM7.70 pegged to a 19.8x P/E multiple to FY27F EPS and 0% ESG factored premium/discount based on three-star ESG rating.

 

Preliminary agreement for solar PV plant with Gamuda Energy, Gentari Renewables. G3nerasi Kinta Sdn Bhd (GKinta) entered into a term sheet for a 21-year Bilateral Energy Supply Contract (BESC) with a US-based multinational technology company where electricity will be supplied to the customer’s data centres under the Corporate Renewable Energy Supply Scheme (CRESS). The project involves a hybrid utility-scale solar photovoltaic plant with a minimum net capacity of 680MWac in Perak, supported by a four-hour battery energy storage system (BESS). With COD targeted for 2029, GKinta expects the project to generate gross revenue exceeding RM10bn over the 21-year offtake period. GKinta is wholly owned by G3nerasi Mutiara Sdn Bhd, a JV between SD Guthrie Renewable Energy (33.5%), Gamuda Energy (33%) and Gentari Renewables (33.5%). Completion of the BESC and other relevant CRESS agreements is targeted for 1Q27, subject to the Renewable Energy Supply Access Agreement with Tenaga Nasional and the required CRESS approvals.

 

Our View. We view the term sheet as positive for SDG’s long-term earnings diversification, reinforcing its strategy of expanding beyond plantation into renewable energy. While the project offers long-term recurring income visibility, the near-term earnings impact should remain limited as the project is still at the development stage, with COD targeted for 2029. Based on SDG’s 33.5% effective interest, a 30% illustrative PBT margin would imply c.RM48m in annual attributable PBT, although the actual contribution will depend on the final project economics and financing structure.

 

The expected use of non-recourse project financing should also limit the direct balance-sheet funding requirement for SDG, although equity contributions will still be required in proportion to its 33.5% interest.

 

Earnings forecast. No change.

 

Outlook. We believe that SDG’s topline performance will continue to be primarily driven by the Group’s core integrated plantation operations. Upstream earnings should remain supported by elevated CPO prices arising from El-Nino supply risks although we note the current peak production period could serve to soften price upside. Downstream margin volatility is expected to continue albeit with resilient performance in Bulk and Trading for 2HFY26 offset by Differentiated performance. Lastly, Industrial Development and RE continue to be pivotal for the Group’s long-term diversification strategy.

 

Valuation. Retain BUY with a target price of RM7.70 based on a P/E of 19.8x on FY27F EPS and 0% ESG factored premium/discount based on a three-star ESG rating.

 

Risk. EU export ban and regulations, changing weather patterns affecting FFB production, taxation and export ban in Indonesia threatening local CPO demand, frequent labour turnover and rising operational cost.

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