SLVEST: Renewable Energy Player Secures Landmark Project, Target Price Raised

A leading renewable energy player has secured a significant project under the LSS PETRA 5+ (LSS5+) programme, prompting PhillipCapital to raise its target price and reiterate a “BUY” recommendation. The company, a key beneficiary of the nation’s energy transition goals, clinched a contract to develop a 470MWac large-scale solar power plant in Perak.

Project Win Bolsters Future Prospects

The Energy Commission announced the award of the LSS5+ programme on Tuesday, 2nd September, allocating a total approved capacity of 2GW to 13 successful bidders. The company emerged as one of the biggest beneficiaries, securing the substantial 470MWac project in Perak. This initiative will be undertaken through a consortium where the company holds a 20% stake, with Malakoff holding the remaining 80%.

The consortium is poised to enter a 21-year solar power purchase agreement with TNB, with commercial operation anticipated by the end of CY27.

Financial Implications and Outlook

Beyond undertaking the Engineering, Procurement, Construction, and Commissioning (EPCC) work, the company will also derive recurring income as an asset owner at a later stage. Based on an estimated construction cost of RM3m/MW, the potential EPCC value of the project is approximately RM1.4bn. PhillipCapital estimates that the company’s effective 20% stake could contribute RM4m in net profit, assuming tariff rates of 14-16 sen/kWh, implying a project Internal Rate of Return (IRR) of 7%. The initial equity outlay for its share, estimated at RM56m, is expected to lift net gearing to a manageable 0.20x in FY27E, up from 0.15x currently.

PhillipCapital has notably raised its FY27E order book replenishment assumption to RM2.2bn, a significant increase from the previous RM1.2bn. This upward revision is attributed to expected EPCC contract awards under LSS5+ and the company’s robust track record of capturing approximately 30% of previous LSS cycles. Consequently, the research house has raised its FY27-28E earnings forecast by 9-18%.

Analyst’s Take and Key Risks

Following the earnings adjustments, PhillipCapital reiterated its “BUY” rating with a higher Sum-of-Parts (SOP)-derived target price of RM3.36, up from the previous RM3.05. The analyst firm continues to favor the company for its prominent position in the solar renewable energy sector and its role as a key beneficiary of national energy transition policies. However, key downside risks identified include potential government renewable energy policy changes, delays in project execution, intense market competition, and volatility in solar module prices.