This article first appeared in The Edge Malaysia Weekly on August 12, 2019 - August 18, 2019
LOCALLY listed Chin Hin Group Bhd is widely known as one of the largest home-grown building material distributors in Malaysia, but few know of its associate company, Solarvest Holdings Bhd, which is en route to an ACE Market listing in October.
The proposed listing, approved by Bursa Malaysia last month, is timely given the positive industry factors encouraging the use of renewable energy.
Solarvest managing director Lim Chin Siu is confident of the prospects for the solar industry as the cost of generating renewable energy is now almost on par with conventional energy generation.
“Solar companies in Malaysia are in a sweet spot. The business environment is favourable to us because the prices of solar equipment, panels and inverters have dropped substantially since 2012,” he tells The Edge in an exclusive interview.
To recap, Chin Hin bought a 45% stake in Atlantic Blue Sdn Bhd (ABSB) — a turnkey engineering, procurement, construction and commissioning (EPCC) solution specialist that designs, procures, installs and commissions large-scale solar (LSS) projects — for RM24.75 million in August 2017.
ABSB wholly owns Solarvest Energy Sdn Bhd (SESB), which installs rooftop solar power systems for residential, commercial and industrial areas, and Powertrack Sdn Bhd, which operates and maintains solar power systems.
Paving the way for the initial public offering (IPO), Solarvest Holdings was created to be the listed vehicle and holding company of ABSB, SESB and Powertrack.
After a shareholding restructuring, Chin Hin will then own a 45% stake in Solarvest Holdings. The remaining 55% will be controlled by Atlantic Blue Holdings Sdn Bhd — the private vehicle of Lim and his partners Edmund Tan Chyi Boon and Solarvest CEO Davis Chong Chun Shiong.
Post-listing, Atlantic Blue’s and Chin Hin’s shareholdings in Solarvest will be diluted to 41.1% and 33.6% respectively. Public investors will own the remaining 25%.
“Chin Hin views us as an important associate partner in their group. They don’t set any target for us, we set targets for ourselves. They give us a free hand to run our solar business. At the moment, they are quite happy with our performance,” says Chong.
In the financial year ended Dec 31, 2018, ABSB contributed RM5.2 million, representing 22% of Chin Hin’s total earnings.
ABSB was set up in 2012 by Lim and Tan, when the Feed-in Tariff (FiT) scheme was first launched in Malaysia. Chong joined the company in 2014.
Since its inception, ABSB had completed and handed over installed capacities totaling 104.37mwp across the residential, commercial and industrial segments. One of its customers in FiT was none other than Chin Hin.
“We knew Chin Hin’s people quite a long time ago through personal relationships. We then successfully delivered the FiT project, and we have enjoyed [a] good business relationship with them since,” says Chong.
In 2017, Chin Hin showed interest in investing in ABSB.
“After a few rounds of discussions, we agreed to sell a 45% stake to them, and we became their associate company. Afterwards, Chin Hin became our strategic partner. They linked us up on some potential projects with their business networks,” he says.
Chin Hin, which debuted on Bursa in 2016, was founded by low-profile businessman and investor Datuk Seri Chiau Beng Teik, who started out as a building materials trader in Kedah in the 1970s.
Together with his eldest son Haw Choon, the Chiau family took over Penang-based manufacturer of rebuilt commercial vehicles Boon Koon Group Bhd in April 2017.
Boon Koon was renamed Chin Hin Group Property Bhd last September to better reflect its corporate identity after it diversified into property development.
Policy-driven and proven globally
Back to Solarvest, Chong points out that the solar industry is policy-driven and the FiT programme is proven globally.
“We are very sure that the global market will grow. The question is where, and the answer to that is [dependent on] the policy of a country. We are where we are today because Malaysia launched FiT at the end of 2011, which encouraged us to make the key decision to set up ABSB,” he recalls.
“If you look at Japan, Taiwan, Australia, Germany and Europe, every country that has launched FiT saw its solar industry grow rapidly. That’s the first guess we made and, fortunately, we got it right. After Malaysia introduced FiT, everything fell into place,” Chong adds.
Today, Solarvest is one of the largest solar EPCC contractors in Malaysia. Its customers for LSS projects are solar power plant developers while its clients for commercial rooftop projects include ViTrox Corp Bhd and NTPM Holdings Bhd.
“Under the LSS1 (the first cycle of large-scale solar) scheme, we submitted one (tender), [and] we won one. For the LSS2, we submitted six, [and] we won four, including three turnkey projects worth RM150 million in total and one onshore project without procurement. We might be securing another on-shore project under LSS2. This round, LSS3, we hope to do better than LSS2,” says Lim.
He says the solar power projects in Malaysia are expanding — from FiT to LSS, from 1mw rooftop project to 10mw rooftop project.
“For LSS3, the capacity per project is up to 100-MW. Being an EPCC, we need a lot of working capital to fund our projects and [to] buy equipment. This is a good time for us to tap into the capital markets to fund our future growth. Without the IPO, it may be difficult for us to move forward,” Lim explains.
Notably, Solarvest is set to become the first pure solar EPCC firm to be listed on Bursa. Meanwhile, its direct competitor Mattan Bhd, is also planning to list.
Among the existing listed companies, solar farm developer Cypark Resources Bhd may be its closest peer.
Eyeing Taiwan and Vietnam
Going forward, Lim says Solarvest plans to venture abroad to Taiwan and Vietnam.
“Our business model is that we are not going to own the solar farm. We are not a developer. We are going in as [a] contractor, but we need money for working capital. We are exploring some commercial and industrial rooftop projects in Taiwan and Vietnam,” he explains.
Lim highlights that Taiwan is one of the few countries with ongoing FiT programmes, prompting solar players to invest there.
“Currently, Taiwan’s projects are mainly small-scale, but within the next three years, they will be moving towards larger-scale [ones],” he stresses.
As for Vietnam, it is an up-and-coming country driven by LSS schemes.
Among the Southeast Asian countries, says Lim, Thailand and the Philippines have been leaders in solar industry development. But Thailand has been slowing down in recent years while the Philippines no longer has big-scale projects.
“Malaysia is probably the best country (for the solar business). We are growing steadily, we have good policies [and] everybody is looking at us. But Vietnam has been catching up in the past two to three years. They are building so many projects and their policies are very encouraging. There is no doubt that the market potential there is huge,” Lim says.
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