KUALA LUMPUR: KPower Bhd sees strong growth potential ahead, coming from a small base. More contracts could be in store in the near future for it, especially on the renewable energy (RE) front, says AMInvestment Bank Research (AM Research).
According to its projections, KPower’s earnings growth could jump by more than 100% and more than 40% in financial year 2021 (FY21) and forecast FY22, respectively.
It however still pegs KPower at a discount to the average forward 20 times price-to-earnings ratio of leading RE players globally on its smaller market value and it being a relatively new player on this front.
“We maintain our forecast and fair value of RM2.31 based on 18 times the fully-diluted FY23 forecast earnings per share. There is no adjustment to our fair values for the environmental, social and governance criteria based on our three-star rating, ” AM Research said.
KPower has been upgraded to a buy from a hold previously, it said, as its share price had retraced by about 25% since its downgrade on Jan 29 this year.
“Value has emerged. We expect more contract award announcements in the RE infrastructure space, especially in South-East Asia and the Middle East in the coming months, ” AM Research said.
KPower has an outstanding tender book of RM3.9bil of which about 75% are energy-related jobs in the area of hydropower plants and solar-related jobs, while the balance are utilities-related works, it said.
KPower’s outstanding construction order book stands at around RM1.7bil.
AM Research noted that the better job outlook is good news for KPower as it would be on track to meet its assumption for annual job wins of RM1.4bil in the FY21–FY23 period.
“Our assumption is more conservative compared with KPower’s guidance for RM2bil in the forecast FY21 period, ” AM Research said.
“At less than 16 times of the FY23 forecast earnings, we believe that this homegrown RE player remains a compelling investment case, given its involvement in the green sector of which the growth trajectory is just beginning, ” it added.