PETALING JAYA: Solarvest Holdings Bhd’s shares continue to gain ground following its recent large-scale solar four (LSS4) job wins.
Investor interest in the company’s shares is also sustained by the counter’s attractive valuation.
Solarvest’s shares had been on a rising trend for the past one week. The counter rose two sen to close at RM1.17 on Monday, representing a total gain of 13.7% from RM1.02 last Tuesday.
An analyst told StarBiz that he was optimistic about Solarvest’s growth prospects over the longer term as sustainable energy gains traction in the economy. He said the company would stand a good chance to win more contracts in the renewable energy or RE space.
“We are optimistic about the company’s ability to secure more contracts, following recent contract wins, which will obviously help improve Solarvest’s earnings visibility,” the analyst with a bank-backed research said.“The fact that the company is involved in renewable energy business also puts it in a good position of growth amid the increasing emphasis on sustainable energy worldwide,” he added.
Solarvest has announced it had secured the main engineering, procurement, construction and commissioning (EPCC) contract for a 20.76MW large- scale solar photovoltaic plant in Kulim, Kedah. Worth RM87.5mil, this was its second LSS4 year-to-date.
Earlier this month, the company bagged a RM43mil EPCC job for a 10.95MW solar plant in Kerian, Perak, from MK Land Holdings Bhd.Following Solarvest’s contract win last week, RHB Research upgraded its call on the company to “buy” from “neutral”, with a target price of RM1.32.
The brokerage said while Solarvest’s earnings for the first half of its financial year (FY) ending March 31, 2022, are expected to be affected by stricter lockdown measures in Malaysia amid the high number of Covid-19 cases, the recent share price weakness presents an opportunity for investors to trade on further positive news flow from potential contract wins in the coming months.
“With the second win in less than two weeks, we expect more LSS4 EPCC contract flows in the coming months, as the group continues to progress in its discussions with other shortlisted LSS4 bidders,” RHB Research said in its note.
The brokerage had imputed about RM600mil worth of LSS4 EPCC job wins in its forecasts.
It noted Solarvest’s share price had declined about 24% in the past month, mainly due to the high number of Covid-19 cases that had led to stricter lockdown measures.
“These stricter measures have slowed the overall progress billings of Solarvest’s solar EPCC projects. While solar EPCC contract flows remain robust, the lockdown and high solar panel prices will likely continue to undermine near-term earnings,” RHB Research explained.
Despite the expected near-term earnings weakness for Solarvest, RHB Research said the counter’s current valuation at 24 times price-earnings of FY23, or about 20% discount to regional peers, was attractive for investors to trade on potential positive news flow from further LSS4 and commercial-and-industrial contract wins in the coming months.
“Once the pandemic is under control, and the economy reopens, Solarvest would be able to resume its EPCC work, backed by strong demand for solar energy and its robust RM316mil outstanding order book,” it said.
Solarvest’s FY20 net profit grew 3% to RM16.14mil from RM15.67mil in FY19, while FY20 revenue fell 11.5% to RM224.29mil from RM253.43mil in FY19.
In its filing with Bursa Malaysia, Solarvest said the outlook for the solar photovoltaic (PV) industry in Malaysia remains optimistic and the government is committed to support the growth of PV solar industry, where renewable energy is targeted to contribute 31% to the national capacity mix by 2025.
To achieve higher exposure in asset ownership for recurring income, the group said it would also venture into Taiwan, Vietnam and the Philippines.
It noted the continuous uptake and demand for solar energy remain robust as businesses are intensifying its environmental, social and governance efforts. The group would also continuously bid for new contracts to replenish its order book.