Analysis: Solarvest’s proposed placement of 6 per cent of new shares not concerning

Solarvest Holding Bhd’s proposed placement of 6 per cent of new shares is not concerning as it will translate to only a mild earnings per share (EPS) dilution, says analysts at Kenanga Investment Bank Bhd’s research arm (Kenanga Research).

To recap, Solarvest has announced on April 9 that it would be placing up to 6 per cent of new shares or 40.2 million new shares at RM1.41 per share in order to raise net proceeds of RM56 million to fund its capital expenditure (capex) programmes and working capital.

These capex programmes include its Powervest Solar financing programme with an installed capacity of about 4MWp and its three solar plants under the Corporate Green power Programme (CGPP).

According to Kenanga Research, they are unperturbed by the proposed placement as the exercise is expected to only dilute their Solarvest FY25F and FY26F EPS by 1 and 2 per cent, respectively.

And this effect is expected to be further mitigated by the interest savings generated from the placement.

The research arm guides that the proceeds from the exercise is estimated to reduce Solarvest’s net debt and gearing of RM107.1 million and 0.5-times as of end-3QFY24 to RM51.1 million and 0.2-times, respectively.

“A 6 per cent increase in its share base is partially mitigated by interest savings of RM2.1 million annually,” said the research arm.

To reflect these interest savings, the research arm raises their FY25 to FY26 net profit forecasts by 4 and 3 per cent respectively.

That said, analysts from Maybank Investment Bank Bhd’s research arm (Maybank Research) were of a differing opinion and opined that the proposed exercise would dilute their FY25 and FY26 EPS estimates by 5.6 per cent each.

However, they note that they have yet to impute the new income from secured CGPP projects, as they are still waiting finalised details from Solarvest’s management at this juncture.

Maybank Research also guides that Solarvest’s outlook remains positive as its management is currently pursuing potential EPCC project opportunities of circa 443.4MWp under the CGPP for orderbook replenishment in 4QFY24.

“Meanwhile, Solarvest has also secured potential local corporate PPAs of circa 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 (NEM),” said Maybank Research.

Kenanga Research maintains an ‘outperform’ call on Solarvest but fine tunes their target price upwards by 2 per cent from RM1.99 to RM1.91 as they recalibrate their estimates for potential proceeds from the conversion of its outstanding warrants and ESOS.

While Maybank Research maintains their ‘Buy’ call with an unchanged SOP derived target price of RM1.76.