KUALA LUMPUR (Dec 31): Sunview Group Bhd’s (KL:SUNVIEW) recent RM70 million acquisition of a solar plant could lift the group’s annual earnings by 22%, according to TA Securities.
The assumption is based on an 80:20 debt-to-equity structure post the acquisition of the 50MWac LSS4 solar plant from PKNP Reneuco Suria Sdn Bhd, said the house in a note on Wednesday.
Although it marks a meaningful step in expanding its recurring income base, the project is currently 79% completed and will require RM50 million to RM120 million in additional funding to complete.
TA cautioned that this acquisition is likely to stretch Sunview’s balance sheets, as the group’s gross cash of RM55 million at the end of the financial year ended Sept 30, 2025 (FY2025) is insufficient to cover both the purchase consideration and completion cost.
As a result, Sunview is expected to draw down additional borrowings to fund the purchase.
“Depending on the final total capital expenditure of between RM130 million and RM150 million, we estimate the PIRR (project internal rate of return) could range between 6%-8%, which is a decent rate of return for an LSS plant,” TA Securities mentioned in the notes.
The earnings uplift is back-end loaded, as the plant is targeted to achieve commercial operations targeted (COD) only by late 2026 (4QCY2026), subject to shareholder approval and completion of the acquisition by 2Q2026.
The research house noted that the Sunview’s role as the original engineering, procurement, construction and commissioning (EPCC) contractor for the project gives it detailed technical knowledge of the plant, potentially reducing execution risk during the remaining construction phase.
TA Securities noted that Sunview’s current valuation of 19.6 times CY2026F price-to-earnings ratio (PER) is above its historical mean of 18 times, suggesting that the stock remains stretched even after accounting for the earnings upside.
Thus, the research firm maintained its 'sell' call on Sunview with an unchanged target price (TP) of 35 sen, citing stretched valuations despite the earnings upside.
At the time of writing on Wednesday, Sunview's shares slipped half sen or 1.4% at 36.5 sen, valuing the group at RM207.2 million.