Optimistic outlook for RE sector expected to bolster Samaiden earnings

PETALING JAYA: Samaiden Group Bhd’s earnings outlook is expected to be supported by the optimistic outlook for the renewable energy (RE) sector in Malaysia, underpinned by the government’s goal of RE making up 70% of total generation mix by 2050.

Samaiden Group via its indirect wholly-owned subsidiary, Samaiden Biomass Energy Sdn Bhd has received the Feed-in Tariff (FiT) approval certificate from the Sustainable Energy Development Authority Malaysia.

This approval gives the company the green light to construct and operate a biomass power plant in Tangkak, Johor which will supply a net export capacity of six megawatts to Tenaga Nasional Bhd.

The 21-year power purchase agreement will commence in January 2027.

Kenanga Research said the FiT rate for the power plant at 34sen per kilowatt, and based on the research house’s estimates, it will fetch an annual revenue of RM3mil and a profit after tax margin of 32%.

Along with the softening panel prices, Kenanga Research expects the internal rate of return for the biomass power plant at 8% to 10%.

“Samaiden’s long-term growth is well-supported by the National Energy Transition Roadmap which sets an ambitious target of RE to make up 70% of total power generation capacity by 2050.

“Also, businesses in general, driven by commercial reasons (that is to save cost) and environmental, social and governance considerations, have voluntarily invested in solar energy generation assets following the recent hikes in electricity tariffs,” the research house said in a report.

Kenanga Research maintained an “outperform” call on Samaiden with a target price of RM1.51 a share.

The research house continues to like Samaiden for its position as one of the top players in the local solar engineering, procurement, construction and commissioning market, and for the company’s ability to provide end-to-end solutions, including financing, backed by the group’s proven track record in delivering projects on time and within budget.

On the other hand, RHB Research which maintained its “buy” call on Samaiden with a TP of RM1.55 a share, said the new development marks Samaiden’s second contract win for the year, reflecting its strong position in the RE space.

“We maintain our earnings estimates for now, pending more details as Samaiden is still fine-tuning its costing (biomass plant capital expenditure is generally around RM10mil to RM12mil per megawatt) as funding structure for this new facility,” the research house said.

RHB Research said based on its back-of-the-envelope calculations, the biomass gas plant could roughly bring in earnings of RM3mil to RM4mil per annum.

“Overall, management has guided for a double-digit equity IRR. On timeline, it is looking to achieve financial close and start construction works in the second half of 2024.

“With regards to the EPCC contract on biomass plants won in 2020 and 2021, progress has been rather stagnant, as the project owners are resolving their own financing terms. Similarly, its biogas plant is being re-evaluated on cost optimisation terms, with management hoping to start construction soon,” the research house said.

MIDF Research said this will be the third asset under Samaiden’s belt after winning a gross 43MW capacity under the Corporate Green Power Programme (to be operational by 2025) and a smaller 0.5MW Sunway Nexis solar facility which is already operational.

“At a conservative project IRR projection of 9% (we gather Samaiden will attempt to hit double-digit levels), we estimate equity value accretion of 8 sen per share and levelized annual earnings of RM3mil to RM4mil, which is estimated to boost group bottomline by 13% once operational in the financial year 2028,” the research house said.

MIDF Research maintained a “buy” call on Samaiden with a TP of RM1.62 a share.