KUALA LUMPUR: ACE Market-listed VSolar Group Bhd — formerly Fast Track Solution Holdings Bhd — which is in software solutions, media publishing and more recently renewable energy, is relying on the commercial start of its 1mw solar plant in Kinta, Perak, to return the company to the black this financial year ending Dec 31, 2015 (FY15).

The plant, which marks the group’s maiden venture into renewable energy, costs RM4.6 million.

“We have achieved the initial operation date last year. Currently, we are waiting approval from the regulator to commence commercial operations. This will boost earnings and hopefully, we can return to the black beginning this year,” VSolar (fundamental: 0.6; valuation: 0) executive director Ameezan Jamil told The Edge Financial Daily in an interview recently.

Its stock garnered active interest last month after it announced on April 21 that it had signed a collaboration agreement with Japan’s Eastasia Group Co Ltd to provide engineering and construction solutions to develop commercial solar farms.

Ameezan said VSolar intends to expand its base from an asset owner and operator to providing engineering, procurement and construction services for commercial solar farms.

“You can view this collaboration as diversifying our base into construction of solar power assets. Our collaboration with Eastasia will allow us to share ideas, expertise, and also intellectual property, especially in the design of solar power plants. In the long run, we aim to bid for solar farm construction projects. Whether it will be on joint-venture basis, that remains to be seen as we are very much at a preliminary stage,” he said.

Following the announcement, Vsolar’s stock, which had been trending upwards since late January (Jan 26: 11.5 sen), hit a multi-year high of 38 sen on April 22, up 230% from Jan 26. The stock has since trended downwards and settled at 14.5 sen last Friday, which gave it a market value of RM43.14 million. Year-to-date, it is still up 3.5 sen or 31.8%.

Vsolar manages the 1mw solar plant in Kinta via its wholly-owned unit Solar Interactive Sdn Bhd. The group signed a 21-year renewable energy power purchase agreement in 2013 with Tenaga National Bhd (TNB) to sell the electricity generated at a fixed tariff rate of RM1.3812 per kw hour.

“We invested quite heavily when we ventured into the solar power business in August 2013, forecasting a 13% return on investment within seven years of operations. We believe that the solar power business will resolve our cash-flow problem once it runs commercially,” said Ameezan.

“The [TNB] deal is good for us as it provides recurring income. Each mw is expected to generate an income of some RM150,000 per month,” he said.

Looking ahead, Ameezan said VSolar is focused on solar regeneration as its core business and aims to build multiple new solar plants in the country with installed capacity of up to 10mw within the next three years.

However, The Edge weekly had reported that Vsolar may face challenges in this respect, as, apart from being a loss-making entity in the last seven financial years (FY08 to FY14), it is relatively new to solar power generation. Additionally, Sustainable Energy Development Authority has no more solar capacity left for bidding under the new Feed-in-Tariff system following the award of 66mw this year.

“We have done our numbers and we would not be in this business if we do not have confidence in it. Yes, there are challenges, but that is something that we need to constantly improve,” Ameezan said.

Meanwhile, to grow its business to the next level, VSolar is expecting to raise up to RM115.31 million from its latest round of cash call announced on Dec 8 last year, which is slated to be completed by the middle of this year. The proposed rights issue with warrants has been fixed at 10 sen per share.

The bulk of VSolar’s income now comes from publication and sales of a lifestyle magazine Jasmine, which has an estimated circulation of 12,000 a month, and trading of computer software.

“These are legacy businesses from the past. We don’t foresee them chalking higher growth due to intense competition. We will still maintain them as we still have loyal customers. But, moving forward, solar business will be our focus,” he added.

In FY14, the group saw its net loss widened to RM3.43 million from RM2.04 million, translating to year-to-date accumulated losses of RM22.17 million. FY14 revenue was down 3% to RM1.54 million from RM1.59 million a year ago, on a 74% revenue slump in its magazine business.

Ameezan said VSolar will look at creating an online advertisement and promotional platform to boost its magazine business revenue. It may also reduce its focus on the highly competitive IT solutions business.

The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company's financial dashboard.

This article first appeared in The Edge Financial Daily, on May 18, 2015.