CHIN HIN GROUP

Target Price: RM1.55

PUBLICINVEST Research reaffirmed its outperform call on Chin Hin as it continues to like the group’s prospects following its move to acquire stakes in three companies.

While it noted that the move was not along the lines of its recent acquisitions, which were more related to building materials, the research house said the business was not completely foreign to the group.

It said the entry into the companies, which are involved in the installing of solar panels on the roof, was somewhat complementary to Chin Hin being a one-stop provider of materials from roof to foundation.

The group currently has 2.85 MW of solar-generating capacity through the installation of solar panels on the rooftops of its manufacturing facilities, which contribute cash flows of about RM4mil a year.

“Renewable energy generation is a growing business, and it is a big business.

“It is estimated that the global solar PV industry will see about a 60% growth from the current 303 GW to 498 GW by 2019.

“Malaysia’s 500 MW quota under the new net metering scheme this year presents ample growth opportunities domestically,” it said in a note.

Chin Hin entered into an MoU to acquire 45% stakes in three companies - Atlantic Blue Sdn Bhd, Powertrack Sdn Bhd and Solarvest Energy Sdn Bhd for a total of RM24.75mil.

Atlantic Blue is mainly involved in the installation of equipment for the generation of electricity by way of solar power energy and the sale of electricity through solar generation, while Powertrack and Solarvest Energy are 40%-owned associates of Atlantic Blue and are involved in the engineering, procurement and construction of solar energy facilities.

The acquisitions will come with profit guarantees of RM10mil per annum for the next two years ending March 31, 2018 and 2019.

“With definitive agreements only expected to entered into within 60 days subject to satisfactory due diligence, we leave our earnings estimates unchanged,” it said, noting that the group was also in the midst of a 10% share placement exercise.