SLVEST: Strategic Private Placement Fuels Growth and Strengthens Balance Sheet
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report highlights a strategic private placement proposal aimed at significantly bolstering a company’s financial position and growth trajectory. The initiative, involving the issuance of up to 10% of its total shares to independent third-party investors, is projected to raise substantial gross proceeds.
Capital Injection and Utilisation
The proceeds from this placement, estimated to be up to MYR254.1 million based on an indicative issue price of MYR3.00 per share, are earmarked for critical strategic initiatives. Approximately 49% (MYR124.6 million) will be allocated for capital expenditure on new large-scale solar photovoltaic (PV) projects, including LSS 5, LSS5+, and Mukah developments, slated over the next 24 months. A further 20% (MYR50 million) is designated for debt repayment, a move expected to significantly reduce interest costs. The remaining 31% (MYR79.2 million) will fund working capital requirements to support the delivery of a robust MYR1.18 billion in EPCC (Engineering, Procurement, Construction, and Commissioning) projects.
Enhanced Financial Structure and Earnings Outlook
The placement is expected to markedly improve the company’s capital structure. Post-placement, total issued shares will increase to 932.4 million from 847.7 million, and net assets per share are anticipated to improve from MYR0.55 to MYR0.77. Gearing is projected to decline sharply from 0.69x to 0.38x, indicating a healthier balance sheet. The report forecasts higher earnings for FY26F-28F, increasing by 4.6%, 9.4%, and 9% respectively, primarily driven by the anticipated reduction in interest expenses. This enhanced financial flexibility is crucial for pursuing larger-scale projects and expanding its renewable energy (RE) portfolio.
Risks to Consider
Despite the positive outlook, potential downside risks include lower-than-expected contract wins, unforeseen changes in project costs, reliance on government policies and initiatives for renewable energy, competition risks, and unexpected increases in overall project expenses.
Investment Recommendation
The investment bank maintains a “BUY” recommendation for the company, adjusting the target price to MYR3.49 from the previous MYR3.58. This adjustment incorporates the effects of the private placement and the enlarged share base. This revised target price includes an 8% ESG premium, reflecting an above-median ESG score.
