SAMAIDEN: Robust Performance on Cost Efficiencies and Strong Order Book, Target Price Raised

A recent research report from TA Securities highlights a compelling financial performance, with core net profit for IQFY26 reaching RM5.4 million. This figure significantly exceeded both the investment bank’s and consensus estimates, accounting for 23% and 19% of their respective full-year projections.

Performance Highlights

The impressive results were primarily driven by a robust 78% year-on-year increase in revenue, fueled by a growing order book from Competitive Green Energy Programme (CGPP) and Large Scale Solar (LSS) projects. Despite a higher effective tax rate, underlying profit margins saw improvement, with the core EBITDA margin rising 0.9 percentage points year-on-year to 11.5%.

However, on a sequential basis, revenue and core earnings experienced a contraction of 35% and 36% quarter-on-quarter, respectively, as most CGPP projects neared completion. This impact was partially mitigated by the early-stage commencement of LSS5 projects. The report also noted that FY25 results were somewhat depressed by a RM5 million provision related to project retention sums due to delays, which could potentially be written back.

Strategic Outlook and Growth Drivers

Looking ahead, the outlook remains positive. The company’s EPCC order book currently stands at a substantial RM617.5 million, primarily composed of LSS4 and LSS5 projects. Significant progress has been made in securing LSS5 EPCC jobs, with four projects totaling 143MWac (estimated RM481 million) already secured, representing 7.2% of the awarded LSS5 quotas. Management is actively pursuing additional LSS5 projects, with the potential to secure another 100MWac, which would elevate its LSS5 EPCC market share to 12%.

For LSS5+, the company is targeting a conservative 10% share, or 200MWac of EPCC jobs. Further opportunities include bids for up to 100MWac EPCC works for the recently concluded LSS Sarawak projects. This aggregate pipeline from LSS5+ and LSS Sarawak could translate into a potential RM900 million to RM1.05 billion in order book replenishment. The investment bank anticipates margin improvements from FY26F onwards, primarily due to better cost efficiency from optimized project design and location proximity, as well as the locking in of cheap solar module costs ahead of project execution. The group’s two CGPP assets are expected to be completed within the next 1-2 quarters, contributing an estimated RM2 million annually to recurring earnings.

TA Securities has revised its FY26F-28F net profit forecasts upwards by 16%-24%, reflecting expectations of stronger project margins and the upcoming LSS5+ asset coming online by mid-FY28F. The investment bank projects a robust 3-year earnings CAGR of +29% up to FY28F.

Valuation and Recommendation

Factoring in the earnings revision and the upcoming LSS5+ asset, TA Securities has raised its Sum-of-the-Parts (SOP)-derived target price to RM0.25. The investment bank reiterates its BUY recommendation, citing the company as a key beneficiary of an upcycle in renewable energy plant-up, supported by a solid order book, strong net cash position, and a robust pipeline of RE assets. Key risks include a sharp rise in raw material costs and delays in project implementation.