KUALA LUMPUR (June 19): Biomass boiler company BM Greentech Bhd's (KL:BMGREEN) entire acquisition of Plus Xnergy Holdings Sdn Bhd (PXH) for RM110 million will strengthen the group’s solar segment by expanding its portfolio to large scale solar projects, said Kenanga Research.
PXH is a solar photovoltaic (PV) system engineering, procurement, and construction contractor with a track record of having completed over 400 megawatt peak (MWp) of solar PV installed capacity since its inception in 2013.
"We believe its solar segment will contribute about 30% of group profit after tax.
"We lift our target price by 13% to RM1.30 from RM1.15 previously, but maintain our 'underperform' call," it said in a research note.
Kenanga Research likes BM Greentech for the long-term investing and upgrading trend of palm oil milling assets driven by growing environmental, social and governance awareness among millers.
It also likes the company's strong customer base with reputable names such as KL Kepong, Wilmar, Sime Darby, Boustead and Tradewinds, and its growing presence in solar engineering, procurement, construction and commissioning space.
"However, over the immediate term, amid flattish crude palm oil (CPO) prices, planters are likely to cut back on their capital expenditure including the replacement and upgrading of boilers," it said.
Risks to its call include palm oil millers beginning their capex plans on a sharp rise in CPO prices, lower input cost, and operations in regional markets gaining traction.
At 10.59am, BM Greentech's share price was 1 sen lower at RM1.77 with 2.18 million shares traded.
Posted by Lam Seng Fatt