Solarvest Holdings Bhd
Buy. Target price: RM1.76
SOLARVEST has proposed a private placement of up to 40.2 million new shares, raising approximately RM56.7 million. The proceeds will be for: (1) capital expenditure for C&I rooftop solar projects (RM12 million), (2) capital expenditure for the secured 90MWac CGPP (effective ownership of 43.5MWp) projects (RM28.5 million), and (3) working capital requirement (RM15.5 million). Subject to obtaining all the required approvals, the proposed private placement is expected to be completed by Q2’24.
The proposed exercise will dilute our FY25/26E EPS estimates by -5.6% each, based on an new enlarged share based of 710.5 million. We have yet to impute the new income from the secured CGPP projects, pending finalised details from management.
We understand that management is pursuing potential EPCC project opportunities of 443.4MWp under the CGPP for order book replenishment in Q4’24. Meanwhile, Solarvest has secured potential local corporate PPAs of 110MWp under Powervest and overseas projects of 23.5MWp. We expect Solarvest to continue growing its orderbook, capitalising on the 800MW CGPP projects, as well as new RE quotas of 2GW LSS5 and 500MW quota under the Net Energy Metering.
There are several risks factors for our earnings estimates, target price and rating for Solarvest. Slower-than-expected progress for its EPCC work will affect the timing of earnings recognition and increase in solar panel and inverter costs could negatively affect its solar project margins. Another earnings risk would be if a new pandemic occurs.
Maintain BUY with an unchanged SOP-TP of RM1.76 (EPCC on PER + assets/LSS4 on DCF).