Kenanga Research said KMESB’s limited solar presence and distinct client base will create a strategic opportunity for both parties.
PETALING JAYA: Analysts are overall positive on Solarvest Holdings Bhd
’s latest acquisition of a 30% stake in mechanical and electrical (M&E) firm Kee Ming Electrical Sdn Bhd (KMESB).
The stake is worth RM15.3mil and the acquisition is expected to be finalised by the first quarter of calendar year 2025.
The deal includes a cumulative RM20mil profit guarantee over three years, with RM6mil to be recognised in financial year 2025 (FY25) and the remaining RM14mil spread across FY26 and FY27.
KMESB is a key player in the M&E engineering, procurement, construction and commissioning (EPCC) sector, focusing on commercial, industrial and solar power plants.
Sharing its view on the deal, Kenanga Research said KMESB’s limited solar presence and distinct client base will create a strategic opportunity for both parties.
Of which, Solarvest and KMESB will be able to leverage their complementary strengths, expand their market reach and unlock growth opportunities.
“The integration promises cost and operational synergies, especially in Solarvest’s solar EPCC projects. With a solid RM200mil order book, KMESB offers a strong revenue visibility for the next two years,” the research house stated.
Also on the same note, Phillip Capital Research stated that it views the deal to be earnings accretive and priced at an undemanding 7.3 times FY26 price to earnings ratio (PER), a discount to Solarvest’s PER of 22 times.
“We expect this acquisition to lift Solarvest’s FY26 to FY27 earnings by 3%. Sitting on a gross cash balance of RM130mil as of the second quarter of FY25, Solarvest would be able to fund the acquisition comfortably.
“Post-acquisition, we estimate the net gearing level to increase to 0.22 times from the current 0.17 times,” Phillip Capital Research added.
That being said, Kenanga Research raised its FY25 and FY26 earnings forecasts on Solarvest by 3% each to reflect the earnings enhancement from the acquisition. The research house also lifted its target price by 2% to RM1.99 apiece with an “outperform” recommendation.
“We like Solarvest for the bright outlook of the renewable energy (RE) market in Malaysia, its dominant market position with a market share of over 30% in the solar EPCC space, and its strong earnings visibility backed by sizeable outstanding order and tender books as well as its recurring income,” it added.
Despite not making any changes to its earnings forecasts – pending finalisation of the deal, Phillip Capital Research maintained a “buy” call on Solarvest with a target price of RM2 per share. The research house stated that it favoured Solarvest for being a dominant player in the solar RE space. The counter closed 2.96% down to RM1.64 yesterday.
