Solarvest to benefit from robust project pipeline

JAYA: With a host of local renewable-energy initiatives, companies in the space are seeing a steady flow of jobs.

One beneficiary of Malaysia’s commitment towards energy transition is Solarvest Holdings Bhd, an engineering, procurement, construction and commissioning (EPCC) company, which has also been building a portfolio of solar photovoltaic (PV) assets for recurring income.

“Solarvest’s project pipeline remains robust and it is poised for a strong fourth quarter ending March 31, 2024 (4Q24) and it may turn out to be a record full-year,” an analyst told Starbiz.

He said the group is seeing a good start for its 2025 financial year (FY25), bagging a Rm40.4mil rooftop-solar EPCC job from Scientex Bhd last week.

This could lead to securing a slice of the Large-scale Solar 5 (LSS5) programme that was recently opened for bidding by the government, plus other large private developments.

Solarvest’s new Rm40mil solar EPCC job involves installing rooftop solar PV systems for eight identified sites with a cumulative capacity of 21-megawatt peak. Solarvest said it aims to complete the project, which falls under the self-consumption and net energy metering (NEM) schemes, within six to nine months.

With this, Solarvest’s outstanding order book now stands at Rm282.4mil, said Kenanga Research, which anticipates a gross profit margin of 14%-17% from the job.

“We maintain our forecasts, target price of RM1.91 and ‘outperform’ call on the company,” the research firm said in a note to clients.

Shares of Solavest have risen by 82% in the past year, closing at RM1.59 last Friday.

At this level, the stock is trading at a oneyear forward price-earnings ratio of 39.7 times – higher than peers in the sector.

Meanwhile, Phillip Capital Research estimates the contract will contribute about Rm3.6mil in profit across the project period assuming a more conservative 9% profit after tax margin.

“This translates to an annual profit contribution of Rm2mil, which accounts for

4% of our FY25 earnings forecast,” said the research firm, which has a RM1.76 a share target price on Solarvest. In the 3Q24, the group posted a net profit of Rm10.65mil, which was its strongest quarter since being listed in 2019.

By end-3q24, Solarvest’s three LSS4 plants came online and this was reflected in a near doubling of electricity sales on a sequential basis, said the research house.

Its last unbilled LSS4 project for that period stood at Rm32mil or about 13% of the group’s order book. This is its sole remaining LSS4 project with seven out of eight completed.

This project is expected to be fully booked in 4Q24. The rest of its unbilled order book constitutes commercial and industrial projects, which command higher margins.

Touching on the sector’s outlook, Kenanga Research believes Corporate Green Power Programme (CGPP) contracts, with a completion deadline by end-2025, will dominate PV system EPCC job flows in coming months.

In addition, Pv-system EPCC jobs will also be buoyed by an additional quota of 400 megawatts from February to December 2024 under the NEM initiative.

The research house said businesses, driven to save cost and ESG considerations, have also voluntarily invested in solar energy generation assets following the recent hikes in electricity tariffs.