This article first appeared in Capital, The Edge Malaysia Weekly on February 3, 2025 - February 9, 2025

NORTHERN Solar Holdings Bhd, a solar renewable energy (RE) specialist, is set to debut on Bursa Malaysia this Thursday (Feb 6), marking the fourth Ace Market listing this year.

The company, through its subsidiaries, is principally involved in the engineering, procurement, construction and commissioning (EPCC) of solar photovoltaic (PV) systems, the generation of renewable energy, and the operation and maintenance of solar PV equipment and systems.

Its initial public offering (IPO) involves the public issuance of 67.25 million new shares and an offer for sale of 35.6 million existing shares by way of private placement, at an issue price of 63 sen per share. All in all, the listing would offer investors up to a 26% stake in the company.

Gross proceeds from the public issuance, amounting to RM42.37 million, are to be used mainly for expansion and working capital purposes.

The offer for sale, which will generate RM22.43 million, will go to its selling shareholders, including co-founders Lew Shoong Kai and Chew Win Hoe, each of whom currently holds a 42.5% stake in Northern Solar.

It is worth noting that real estate developer Lagenda Properties Bhd (KL:LAGENDA) has a 15% stake in Northern Solar.

Post-IPO, Lew — who is Northern Solar’s managing director — and Chew, its executive director, will each hold a 30.8% stake in the company, while Lagenda Properties Bhd will have 12.5%.

At the issue price of 63 sen a share, Northern Solar would have a market capitalisation of RM249.23 million upon listing, based on its enlarged share capital of 395.6 million shares. This values the company at a price-to-earnings ratio of 24.7 times its financial year ended March 31, 2024 (FY2024) earnings.

In FY2024, it made a net profit of RM10.09 million on the back of RM77.97 million in revenue. This was significantly higher than its FY2023 net profit and revenue of RM6.12 million and RM44.67 million, respectively.

Under the public issuance of the IPO, Northern Solar made 19.78 million shares available to the public and 7.91 million shares to eligible directors and employees. The company also set aside 39.56 million shares to bumiputera investors by way of private placement.

The offer for sale of 35.6 million existing shares, meanwhile, was done through private placement to select investors, of which 9.89 million were made available for bumiputera investors.

The public portion of Northern Solar’s IPO was oversubscribed by 73.2 times.

Of the RM42.37 million raised from the public issue of the IPO, more than half — or RM29.17 million — was earmarked for working capital purposes while RM5.5 million is to repay bank borrowings and RM4.55 million is for listing-related expenses.

The remaining RM3.2 million is to establish a new corporate office with an engineering command centre in Petaling Jaya, Selangor, and to fund the establishment of an expanded office in Johor and an additional office in Penang.

M&A Securities is the IPO’s adviser, sponsor, underwriter and placement agent.

Northern Solar does not currently have a formal dividend policy but said it intends to pay dividends to shareholders in the future.

Unlike most other listed solar EPCC players, Northern Solar is purely involved in the rooftop solar segment, catering to industrial, commercial and residential customers. The solar PV EPCC business is the main contributor to its revenue, accounting for 98.8% of the group’s FY2024 revenue.

TA Research, in an IPO note on Jan 13, points out that Northern Solar has demonstrated “impressive” growth, with revenue and net profit achieving a two-year compound annual growth rate (CAGR) of 87% and 80% respectively between FY2022 and FY2024. This was driven by growth in the number and size of projects secured, backed by supportive RE policies.

“Going forward, we project Northern Solar’s revenue to grow further at a three-year CAGR of 20.1% between FY2024 and FY2027. This is expected to be driven by a strong order book of RM83.2 million (as at November 2024), which is 1.1 times the group’s FY2024 revenue,” it says. It expects the company’s net profit to grow at a CAGR of 29% between FY2024 and FY2027, riding on the strong top-line growth.

The research house notes that the group has submitted 387 tenders with a total value of RM1.8 billion. “At a historical success rate of 15%, the tender book could translate into RM270 million worth of potential order book replenishment.”

TA Research values the company at 19.8 times projected FY2026 earnings, which it says is at par with domestic peers involved in the RE EPCC industry. It has a fair value of 98 sen a share on the company, while PublicInvest Research pegged its fair value at RM1.00.

Northern Solar’s listed peers include Solarvest Holdings Bhd (KL:SLVEST), Pekat Group Bhd (KL:PEKAT), Samaiden Group Bhd (KL:SAMAIDEN) and Sunview Group Bhd (KL:SUNVIEW).

Founded in 2019, Northern Solar has already completed over 1,000 solar energy installations nationwide, with a total installed capacity of 71.9MW. “This IPO is the next natural step for Northern Solar as it comes in light of the trends Malaysia and, indeed, the region are seeing in terms of awareness in preserving our environment and addressing climate change challenges,” Lew, 36, says.

The company currently owns and operates 17 solar PV systems, alongside four additional systems held under its 20%-owned associate, Engtex Energy Sdn Bhd. Pipe and valve manufacturer Engtex Group Bhd (KL:ENGTEX) owns the remaining 80% stake in Engtex Energy.

Northern Solar also has a 51% stake in another solar PV system developer, Norwatt Power Sdn Bhd, in which 25% is held by Tengku Fahad Mua’adzam Shah Sultan Ahmad Shah through Hawthorne Capital Sdn Bhd. 

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