RHB Investment Bank Bhd (RHB IB) reiterated positive stance on Samaiden Group Bhd’s (Samaiden) outlook, after the group secured its second contract win for the year, reflecting its strong position in the renewable energy (RE) space.
“It now has a diverse portfolio of RE assets, including solar, biogas and, recently, a biomass facility. Samaiden’s strategic investment across these varied assets positions it as a key player in Malaysia’s drive towards a more sustainable future,” it said in its Malaysia Company Update yesterday (Jan 31).
Samaiden’s indirect wholly-owned subsidiary, Samaiden Biomass Energy, has received the Feed-in Tariff (FiT) approval certificate from the Sustainable Energy Development Authority (SEDA) Malaysia.
This approval allows the construction and operation of a biomass power plant in Tangkak, Johor. The plant will have an installed
capacity of 7MW, and is set to supply a net export capacity of 6MW to Tenaga Nasional Bhd (TNB MK, BUY, TP: MYR11.80).
The tenure for this power purchase agreement is 21 years and will take effect on 22 Jan 2027. while the awarded FiT rate is RM0.34/kWh.
RHB IB said it maintained its earnings estimates for now, pending more details as Samaiden is still fine-tuning its costing as funding structure for this new facility.
Biomass plant capex is generally around RM10 to RM12 milion per MW, according to RHB IB.
“Our back-of-envelope calculation suggests the biomass gas plant could roughly bring in earnings of RM3 milion to RM4 million per annum.
“Overall, management has guided for a double-digit equity internal rate of return (IRR). On timeline, it is looking to achieve financial close
and start construction works in 2H24.
“With regards to the engineering, procurement, construction and commissioning (EPCC) contract on biomass plants won in 2020 and 2021, progress has been rather stagnant, as the project owners are resolving their own financing terms.
“Similarly, its biogas plant is being re-evaluated on cost optimisation terms, with management hoping to start construction soon,” it said.
The research house kept its BUY call and RM1.55 target price (TP), 24% upside. The TP includes a 6% ESG premium, based on its 3.3 ESG
score.
“(There is no change to our TP and stock recommendation. Our sum of parts (SOP) valuation comprises of 24x FY24 price-earning ratio P/E, which is at a 20% discount to Solarvest Holdings Bhd’s 30x – on account of the latter’s larger asset base and bigger regional presence.
“(It’s also consists of) a discounted cash flow DCF, with weighted average cost of capital (WACC) of 7.8%, for its 60%-owned biogas asset.
“Do note that there is potential upside to our outlook, since we have yet to bake in assumptions regarding its Corporate Green Power
Programme (GGPP) assets and the newly secured biomass plant, as we await more details on these.
“Meanwhile, the downside risk include a discontinuation of solar power incentives, competition risks, and higher-than-expected project costs,” RHB IB added.
