KUALA LUMPUR (July 12): Hong Leong Investment Bank (HLIB) research has initiated coverage on the renewable energy (RE) sector with an “overweight” rating, premised on its strong growth potential.

In a note on Wednesday (July 12), the research house said key catalysts include Corporate Green Power Programme (CGPP) awards, next year's national budget and future roadmap/implementation plans.

HLIB said the sector is also expected to grow and benefit from an apolitical multi-year energy transition theme.

“We believe the growth of ESG [environmental, social and governance] investing could drive a rerating of RE stocks with tepid supply in the Malaysian market.

“The two stocks we initiated with this report are the only Main Market-listed solar EPCC (engineering, procurement, construction, and commissioning) players. We initiate coverage on Samaiden Group Bhd with a 'buy' rating and target price (TP) of RM1.43.

“We derive our TP by pegging earnings to a price-earning-to-growth ratio of 1.0 times, implying a target P/E multiple of 25.9 times based on our forecasted three-year earnings CAGR of 25.9%. This compares favourably against Samaiden’s average trailing PE multiple of 28.8 times since listing.

“We initiate coverage on Solarvest Holdings Bhd with a 'hold' rating and SOP-driven TP of RM1.20.

“At our TP, Solarvest trades at a FY24f/25f/26f PE multiple of 31.1 times/28.2 times/20 times. In our SOP valuation, we have applied a 26 times target PE multiple on its EPCC segment based on three-year average segmental EPS forecasts and discounted cash flows of its recurring income stream from LSS4 and Powervest assets,” it said.