RHB Research has maintained its Buy rating and RM2.05 target price on BM Greentech Bhd despite weaker-than-expected first-quarter FY2027 earnings, citing growth opportunities in the bio-energy segment over the next two to three years.
The target price represents a potential upside of 18%, with RHB saying the recent earnings weakness has largely been reflected in the company’s share price.
In its latest research report, RHB said BM Greentech’s first-quarter core earnings fell 25% year-on-year and 46.9% quarter-on-quarter to RM11.3 million, accounting for approximately 18% of full-year expectations.
The weaker performance was mainly attributed to lower project deliveries, which affected profit margins in both the bio-energy and water treatment divisions.
Bio-Energy Segment Offers Multi-Year Growth Potential
RHB identified the Sustainable Energy Development Authority’s (SEDA) 130MW Feed-in Tariff 2.0 programme as a key potential earnings catalyst for BM Greentech.
The research house estimated that the programme could generate RM1 billion to RM2 billion worth of addressable engineering, procurement, construction and commissioning (EPCC) opportunities over the next two to three years.
BM Greentech is estimated to command a 60% to 70% market share among domestic boiler EPCC players, positioning it to pursue contracts under the programme.
With project construction periods potentially extending to 30 months, RHB expects the programme to support the group’s earnings over several financial years.
Meanwhile, the water treatment division is expected to record more moderate growth in FY2027, as Phase 2 of a data centre project could be delayed to FY2028 pending relevant approvals.
The division benefited from a high-margin Phase 1 data centre project in the fourth quarter of FY2026.
Solar Opportunities Under CRESS
RHB said BM Greentech is also exploring opportunities under the Corporate Renewable Energy Supply Scheme (CRESS).
However, it noted that the requirement for projects to commence commercial operations by the end of 2028 could present a challenge, given that construction may take up to 24 months.
The research house has not factored potential CRESS contracts into its earnings forecasts.
Following the latest results, RHB trimmed its FY2027 earnings forecast by 4.4% to reflect weaker expectations for the water treatment division.
It nevertheless maintained its RM2.05 target price, based on 20 times calendar-year 2027 forecast earnings, and projected a dividend yield of approximately 2% for FY2028.
