KUALA LUMPUR (Aug 8): RHB Investment Bank Research has maintained its “buy” call on Solarvest Holdings Bhd at RM1.30 with the highest target price (TP) of RM1.53 (from RM1.46) after the group was shortlisted among bidders for the Corporate Green Power Programme (CGPP) by the Energy Commission.

In a note on Tuesday (Aug 8), RHB said the commission has short-listed 22 solar power producers and the first announcement awarded a total capacity of 563.42 megawatts (MW), with plant capacity ranging between 7MW and 30MW.

A 21-year power purchase agreement (PPA) is expected to be signed between Tenaga Nasional Bhd, selected power producers, as well as their off-takers, with the plants expected to commence operations in 2024-2025.

To recap, the CGPP is a mechanism of virtual PPA, which is implemented using the existing New Enhanced Dispatch Arrangement (Neda) framework.

It is an initiative by the government to have business entities participating in renewable energy for their business operations. It involves three parties: the solar power producer, the corporate consumer and the electricity utility company.

Analysts Miza Izaimi and Lee Meng Horng said Solarvest, via its subsidiary and special purpose vehicle Atlantic Blue, Blazing Solar, and Solarvest Asset Management have won three solar assets totalling at 90MW under three different consortiums.

They noted that the financial details are being finalised and the short-listed power producers are required to apply for the Neda programme within three months.

“Approvals could take three to six months. We expect significant recurring income contributions to kick in starting FY2026,” they said.

They added that Solarvest has the first right to refuse a total of 175MW of engineering, procurement, construction and commissioning (EPCC) jobs, or 31% of the announced 563.42MW capacity — above their assumptions of 150MW.

This was due to Solarvest having undertaken previous CGPP design and consultation for its clients.

“Assuming a contract of RM3 million per MW, the total contracts could be worth up to circa RM525 million,” they said.

Nonetheless, both analysts remained positive on Solarvest in building recurring income via solar assets and strengthening its EPCC order replenishment for the next two years.

“It is well-poised to benefit from the country’s transition towards renewable energy and should stay at the forefront of the local pure-play solar EPCC sector,” they said.

The new TP is based on an unchanged 30 times calendar year 2024 (CY2024) forecast price to earnings and discounted cash flow valuation with weighted average cost of capital at 5.4% on its large-scale solar 4 (LSS4) assets.

“We revise its FY2025 forecast order book replenishment on potentially higher EPCC job wins from CGPP, leading to FY2025-FY2026 forecasted earnings likely being higher by 10.2%-11.9%,” they said.

In the morning trade on Tuesday (Aug 8), Solarvest remained unchanged at RM1.30, valuing the solar producer at RM868.01 million.