This article first appeared in The Edge Malaysia Weekly on October 21, 2024 - October 27, 2024

SOLARVEST Holdings Bhd (KL:SLVEST) wants to grow its renewable energy (RE) business beyond solar and expand to more overseas markets. The group is already in Singapore, Indonesia, Thailand, Vietnam, the Philippines and Taiwan.

Co-founder and CEO Davis Chong Chun Shiong is expecting Solarvest to see more meaningful contributions from its overseas business in 2025. The group is targeting to get at least 30% of its revenue from overseas and from non-solar RE segments.

“The contribution from overseas is still very small. The three countries that we are expecting to at least start to contribute some fundamental (earnings) are Taiwan, Vietnam and the Philippines,” he tells The Edge in an interview.

“For Thailand, Indonesia and Singapore, we are still looking around. We are also waiting for the timing [to enter] Laos and Cambodia. We won’t have a physical office there, but we are looking for RE opportunities.”

Chong says geographical diversification is the group’s long-term strategy to ensure steady earnings flow and to manage the risks to its business.

“We always wanted to diversify into six to seven countries because solar or RE is policy-driven. For instance, maybe Malaysia suddenly slows down [in its RE push], there will be other countries pushing hard [to develop their RE], or vice versa. That’s the diversification strategy we have on managing our business risks,” he explains.

Solarvest expanded its business to Indonesia, Vietnam and the Philippines in 2022. In 2023, the group secured several projects overseas, including 11 projects totalling 12.8mw in Vietnam. It has already completed its first 1mw ground-mounted project in the Philippines.

The group is also expanding its expertise into wind energy, mini-hydro and biogas, as well as a battery storage system to address the intermittency of RE sources.

“We have always wanted to diversify in terms of RE technology as well, not only in geographical location. Who knows, maybe [in the future] solar will be very competitive and it’ll be very hard to make a good IRR (internal rate of return) after that,” says Chong.

Already, Solarvest expanded into installing charging stations for electric vehicles under its in-house brand Powerbee in 2022. The group has installed 150 charging stations to date.

For its solar business, the group has an ambitious target of developing 2.5gw of solar energy assets, both organically and through strategic partnerships, in the next four years. The group has already secured and built a total of 1.2gw projects, he says. “Our target is to secure a RM1 billion order book by the end of this year.”

As at July 31, Solarvest’s unbilled engineering, procurement, construction and commissioning (EPCC) order book stood at RM469 million, which will be progressively recognised in FY2025 and FY2026.

New orders, according to Chong, will be driven by the upcoming fifth Large Scale Solar (LSS5) programme, Corporate Green Power Programme (CGPP) and overseas projects.

He is tight-lipped on whether the group is looking at a bigger asset ownership under the LSS5 programme, saying only that Solarvest has submitted its bid for both ownership and EPCC. “In total, about 1.4gw bid has been submitted, combining EPCC and ownership. That’s all I can say.”

The LSS5 project, which opened up 2gw or 2,000mw for tender, is expected to be awarded in January 2025.

Solarvest has just completed all three of its own solar farm assets totalling 67.3mw under the LSS4 programme. In total, it owns 100mw of solar assets from LSS and rooftops, says Chong.

He says asset ownership is also part of the group’s long-term strategy to ensure recurring income for the group and that it is targeting to have at least 30% of its annual recurring income from solar assets, as EPCC job earnings can be lumpy.

In the first quarter ended June 30, 2024 (1QFY2025), 82.5% of its total revenue came from EPCC, down from 98.1% in 1QFY2024.

The group recorded a net profit of RM7.84 million in 1QFY2025, up 17% from RM6.7 million a year earlier — despite revenue halving to RM72.65 million from RM143.39 million following the completion of its LSS4 project developments — thanks to margin improvements in the commercial and industrial business segment and electricity sales from the three LSS4 plants it owns.

As at June 30, Solarvest’s cash position stood at RM57.14 million, while borrowings totalled RM182.27 million. In April, the group raised RM28.61 million from the first tranche of a private placement, which it allocated as working capital for its CGPP venture and rooftop solar projects.

In total, the group has proposed to raise RM56.70 million from the placement, which Maybank IB Research estimates would dilute the group’s FY2024 and FY2026 forecast earnings per share by 5.6%. Nonetheless, the research house maintains its “buy” call on Solarvest with a target price of RM1.84 per share.

According to Bloomberg data, eight analysts have a “buy” rating for Solarvest, while one recommends a “hold”, with an average target price of RM1.87 per share.

Solarvest’s share price closed at RM1.58 last Thursday, giving the group a market capitalisation of RM1.12 billion.

Meanwhile, Solarvest says it is not actively pursuing residential rooftop solar leasing.

“I think we will continue to focus on capital expenditure [build-and-own] at the moment. Although we are trying to introduce [rooftop] leasing, we need to think of the credit risk,” says Chong.

“This is because we don’t have a P2P (peer-to-peer) energy trading platform or energy exchange market here, meaning that if the house doesn’t use any energy, then basically the pay becomes zero and the investment return becomes zero. So, it’s quite risky for the investor. Hence, we’re not really aggressively pushing leasing or rental model.”

In July last year, the government announced an aggressive plan to lease rooftops to install solar power in a bid to raise the country’s RE to 70% of total power generation by 2050, from 25%.

Under the Net Energy Metering (NEM) programme, which allows both residential and commercial users to generate their own electricity using RE sources and to sell excess back to the grid, users need to fork out huge capital expenditure to install solar panels on their rooftops. A typical residential rooftop solar system of 4.5kWp starts at around RM20,000 to offset a few hundred ringgit in monthly electricity bills.

For commercial customers, the group is actively working on several financing models, including leasing, says Chong.

“We are into a kind of solution, namely, joint venture, zero capital expenditure or even capex projects. We can provide a flexible solution for clients … we manage the credit risk of the off-taker as well,” he adds. 

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