SLVEST: Strategic Partnership Fuels Growth Prospects, Target Price Raised

Overview

A key player in the clean energy sector is set for substantial expansion, driven by a new joint investment framework agreement with a global renewable energy asset manager. This strategic partnership is anticipated to significantly accelerate project rollouts, bolster investment merits, and enhance earnings sustainability. This positive development has led to an uplift in earnings forecasts and an increased target price, with the “BUY” recommendation being maintained by analysts.

Strategic Partnership and Growth Opportunities

The foundation of this optimistic outlook is the collaboration with Brookfield CTF Asia Holdings, a dedicated climate-and-energy transition investment vehicle. The agreement outlines a target to develop at least 1,500MWp of renewable energy projects, primarily under Malaysia’s Corporate Renewable Energy Supply Scheme (CRESS), over the next three to five years. This alliance provides critical access to Brookfield’s extensive funding capacity, which manages USD1 trillion in assets globally, including USD137 billion in renewable power and transition assets, alongside its vast network of corporate off-takers. Projects under this framework will operate through special purpose vehicles (SPVs), with the company holding a 51% ownership stake and Brookfield 49%.

This strategic move is expected to unlock significant growth, potentially securing MYR3-5 billion in Engineering, Procurement, Construction, and Commissioning (EPCC) contracts, which may include battery energy storage systems (BESS). The company will take the lead in all development activities, encompassing site identification, regulatory approvals, and project completion. These responsibilities are also projected to generate additional earnings from developer margins and power generation sales.

Orderbook Strength and Financial Outlook

The company continues to demonstrate robust orderbook momentum, with MYR1.2 billion outstanding as of 1QFY26. Management has set an ambitious target to increase this to MYR2 billion by the end of CY25, with further upside anticipated from upcoming initiatives such as the MyBeST programme roll-outs, Large Scale Solar 5+ (LSS5+) EPCC awards, and various other utility-scale solar projects, including CRESS.

In response to these latest developments, analysts have revised their job replenishment rates, margins, and gearing assumptions, leading to a significant upward adjustment of FY27-FY28 earnings forecasts by 6.6% and 31% respectively. Consequently, the target price has been raised, incorporating an 8% ESG premium, affirming the investment bank’s continued “BUY” recommendation.

Key Risks

Despite the prevailing positive sentiment, potential downside risks include the possibility of lower-than-expected contract wins, unforeseen increases in project costs, continued dependence on government policies and renewable energy initiatives, and intensifying competition within the sector.