PublicInvest values ACE-market-bound Northern Solar at RM1


KUALA LUMPUR: Public Investment Bank (PublicInvest) has assigned a fair value of RM1.00 to Northern Solar Holdings Bhd, which represents a 58.73% premium over its initial public offering (IPO) price of 63 sen per share.

The solar renewable energy specialist is set to list on the ACE Market of Bursa Malaysia on February 6, aiming to raise RM42.4il from the IPO.

Of the funds raised, Northern Solar plans to allocate RM29.2mil (68.8%) for working capital to support the expansion of its solar photovoltaic (PV) systems business.

PublicInvest derived a fair value of RM1 by applying a price-to-earnings (PE) multiple of approximately 26x, based on the 2-year forward earnings and using the +1 standard deviation relative to the forecasted EPS of its peers for FY26.

“We believe the valuation is justified, supported by earnings growth from the existing order book and tender book,” the research house stated.

“The group also recorded a strong net profit margin of 13-19%, compared to its peers' 2-8%, and expects to continue delivering similar margins, given the lower global solar panel prices.”

PublicInvest noted that Malaysia's solar engineering, procurement, construction, and commissioning (EPCC) sector is expected to grow from RM797mil in 2023 to RM1.5bil in 2026, reflecting a compound annual growth rate (CAGR) of 23.5%.

This growth is driven by the country's increasing solar energy adoption, economic expansion, rising electricity demand, urbanisation, declining equipment costs, and recovery in the property market.

Northern Solar’s order book currently stands at RM83.2mil, providing earnings visibility for the next 12 months. The company has also submitted RM1.8bil worth of tenders but does not plan to pursue large-scale solar projects at this stage.

The company intends to expand its market presence by growing its workforce and establishing regional offices in Johor and Pulau Pinang within the next 24 months. It is also exploring opportunities in other states to grow its EPCC and operations and maintenance (O&M) services for solar PV systems.

As at Nov 19, 2024, Northern Solar owns, operates, and maintains 17 solar PV systems under its group and four additional systems through Engtex Energy Sdn Bhd, marking its entry into renewable energy generation.

Moving forward, Northern Solar plans to develop, own, and manage a portfolio of solar PV assets, supplying electricity to net energy metering (NEM) and self-consumption (SelCo) consumers, thus generating stable revenue and diversifying its income streams.

“Looking ahead, we expect Northen Solar’s net profit to grow at 35.9% CAGR, reaching RM15.3mil in FY26F. Our projection is underpinned by its existing order book of RM83.2mil.

“The group also submitted RM1.8bil tender book with historically the winning rate is about 20%. Post IPO, the group plans to expand its market presence regionally with new offices in Johor and Pulau Pinang and exploring opportunities in other states like Melaka, Perak, Kedah, Perlis and Sabah to grow its EPCC and O&M services for solar PV systems,” PublicInvest said.

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Northern Solar , IPO , PublicInvest , ACE Market

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