Pekat (PEKAT МК)
Pekat (PEKAT MK): Private placement to fund solar assets
- Pekat has proposed to undertake a private placement of up to 10% of its enlarged share base
- The proceeds are primarily allocated for the capital expenditure of solar assets while the remaining will be utilised to repay bank borrowings
- Downgrade our rating to HOLD (from BUY) on valuation grounds with an unchanged SOP-derived TP at RM1.57
Proposed private placement
Pekat has proposed a private placement of up to 66.2m new shares, or 10% of its enlarged share capital, increasing its total share base to 727.7m under a maximum scenario. Based on the illustrative issue price of RM1.28, the proposed placement is expected to raise gross proceeds of up to RM84.7m. The corporate exercise is expected to be completed in 3Q25.
Proceeds to fund for future solar assets and debt repayment
The proceeds from the proposed placement have been earmarked for capital expenditure of solar assets across SELCO (RM30m), CRESS (RM25m), and CGPP (RM10m) projects. The balance will be allocated for the repayment of bank borrowings to lower its interest costs. Post completion, the proposed placement is expected turn Pekat into a net cash company of RM30.7m (from 0.19x net gearing as of 1Q25). The proposed private placement is expected to dilute 2025-27E EPS by c.9-10%. Overall, we are neutral on this corporate exercise pending the finalization of the issue price, which will be determined at a later date.
Downgrade to HOLD with unchanged TP of RM1.57
We maintain our EPS forecasts pending the completion of the proposed corporate exercise. However, we are downgrading Pekat to HOLD (from BUY) rating on valuation grounds with the stock currently trading at 21x forward PE (+1SD of its 3-year mean). We keep our 12-month SOP-derived TP unchanged at RM1.57. Key re-rating catalysts include higher-than-expected order book replenishment for its solar projects, ELP, and switchgear segments. Key downside risks include project execution delays, intense market competition, and volatility in solar PV panel prices.
Key Financials
| Y/E Dec | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue (RMm) | 227.5 | 291.1 | 557.5 | 594.9 | 649.1 |
| EBITDA (RMm) | 21.0 | 37.0 | 73.5 | 84.4 | 91.5 |
| Pretax profit (RMm) | 18.1 | 34.6 | 65.2 | 73.5 | 80.1 |
| Net profit (RMm) | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| EPS (sen) | 2.1 | 3.4 | 6.0 | 7.2 | 7.9 |
| PER (x) | 70.5 | 43.9 | 25.1 | 20.8 | 18.9 |
| Core net profit (RMm) | 14.3 | 20.8 | 38.5 | 46.5 | 51.2 |
| Core EPS (sen) | 2.2 | 3.2 | 6.0 | 7.2 | 7.9 |
| Core EPS growth (%) | 47.1 | 45.7 | 85.5 | 20.6 | 9.9 |
| Core PER (x) | 67.9 | 46.6 | 25.1 | 20.8 | 18.9 |
| Net DPS (sen) | 1.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Dividend Yield (%) | 0.7 | 0.0 | 0.0 | 0.0 | 0.0 |
| EV/EBITDA (x) | 45.0 | 27.6 | 14.1 | 12.4 | 11.0 |
| Chg in EPS (%) | – | – | – | ||
| Phillip/Consensus (%) | 0.8 | 0.9 | 0.8 |
Sources: Company, Bloomberg, Phillip Research forecasts
Valuation Analysis
Table 1: Pekat’s 3-year PE
Chart data not available in this format. Key levels: +2SD: 25x, +1SD: 21x, Avg: 18x, -1SD: 14x.
Source: Bloomberg, Phillip Research forecasts
Table 2: Sum of Parts (SOP) Valuation
| SOP Component | Value (RMm) | PE (x) | SOP Value (RMm) |
|---|---|---|---|
| Solar | 18 | 30 | 542 |
| Earthing and lightning protection | 13 | 20 | 255 |
| EPE Switchgear | 12 | 20 | 238 |
| Solar assets (WACC 5.1%) | 61 | 61 | |
| Net cash/(debt) | (80) | ||
| SOP Value | 1,016 | ||
| No. of shares (m) | 645 | ||
| SOP/share (RM) | 1.57 |
Source: Phillip Research forecasts
FINANCIALS
Income Statement
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Revenue | 227.5 | 291.1 | 557.5 | 594.9 | 649.1 |
| Operating expenses | (206.4) | (254.1) | (484.1) | (510.5) | (557.6) |
| EBITDA | 21.0 | 37.0 | 73.5 | 84.4 | 91.5 |
| Depreciation | (1.8) | (2.3) | (3.9) | (5.9) | (6.3) |
| EBIT | 19.2 | 34.8 | 69.5 | 78.5 | 85.1 |
| Net int income/(expense) | (1.1) | (0.8) | (4.4) | (5.0) | (5.1) |
| Associates’ contribution | 0.6 | (0.6) | 0.0 | 0.0 | 0.0 |
| Exceptional gain/(loss) | (0.5) | 1.3 | 0.0 | 0.0 | 0.0 |
| Pretax profit | 18.1 | 34.6 | 65.2 | 73.5 | 80.1 |
| Tax | (4.4) | (11.8) | (18.9) | (19.1) | (20.8) |
| Minority interest | (0.0) | (0.7) | (7.7) | (7.9) | (8.1) |
| Net profit | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| Core net profit | 14.3 | 20.8 | 38.5 | 46.5 | 51.2 |
Balance Sheet
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| Fixed assets | 23.4 | 67.5 | 65.2 | 109.3 | 113.0 |
| Other long term assets | 12.8 | 61.4 | 89.2 | 87.0 | 69.3 |
| Total non-current assets | 36.3 | 129.0 | 154.4 | 196.3 | 182.3 |
| Cash and equivalents | 27.0 | 38.2 | 59.7 | 51.5 | 98.6 |
| Stocks | 24.9 | 94.1 | 87.9 | 92.8 | 101.3 |
| Debtors | 76.7 | 142.9 | 206.2 | 220.0 | 240.1 |
| Other current assets | 17.5 | 14.4 | 14.4 | 14.4 | 14.4 |
| Total current assets | 146.1 | 289.7 | 368.2 | 378.9 | 454.4 |
| Creditors | 29.1 | 82.3 | 107.6 | 113.7 | 124.1 |
| Short term borrowings | 1.8 | 39.5 | 39.5 | 39.5 | 39.5 |
| Other current liabilities | 11.2 | 42.8 | 42.8 | 42.8 | 42.8 |
| Total current liabilities | 42.1 | 164.5 | 189.9 | 196.0 | 206.4 |
| Long term borrowings | 3.2 | 52.6 | 92.6 | 92.6 | 92.6 |
| Other long term liabilities | 0.3 | 6.2 | 6.2 | 6.2 | 6.2 |
| Total long term liabilities | 3.5 | 58.7 | 98.7 | 98.7 | 98.7 |
| Minority interests | 0.1 | 36.7 | 36.7 | 36.7 | 36.7 |
| Shareholders’ Funds | 136.7 | 158.7 | 197.2 | 243.7 | 294.9 |
Cash Flow Statement
| Y/E Dec (RMm) | 2023 | 2024 | 2025E | 2026E | 2027E |
|---|---|---|---|---|---|
| PAT | 13.7 | 22.0 | 38.5 | 46.5 | 51.2 |
| Depreciation & Amortisation | 1.8 | 2.3 | 3.9 | 5.9 | 6.3 |
| Working capital changes | 6.2 | (49.1) | (31.7) | (12.7) | (18.1) |
| Others | 4.9 | 40.0 | 7.7 | 7.9 | 8.1 |
| Cashflow from operation | 26.6 | 15.1 | 18.6 | 47.6 | 47.5 |
| Capex | (0.7) | (9.3) | (40.0) | (50.0) | (10.0) |
| Disposal/(purchases) | 0.7 | 21.3 | 0.0 | 0.0 | 0.0 |
| Others | (0.6) | (88.9) | (6.7) | (15.4) | 0.0 |
| Cash flow from investing | (0.7) | (76.9) | (46.7) | (65.4) | (10.0) |
| Debt raised/(repaid) | (19.0) | 87.0 | 40.0 | 0.0 | 0.0 |
| Net interest income/(exp) | (1.1) | (0.8) | (4.4) | (5.0) | (5.1) |
| Dividends paid | (6.4) | (3.0) | 0.0 | 0.0 | 0.0 |
| Others | 10.4 | (11.0) | 14.0 | 14.6 | 14.7 |
| Cash flow from financing | (16.2) | 72.1 | 49.6 | 9.6 | 9.6 |
| Free Cash Flow | 25.9 | 5.9 | (21.4) | (2.4) | 37.5 |
Source: Company, Phillip Research forecasts
Disclaimers
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