KUALA LUMPUR (Nov 4): AmInvestment Bank Bhd has initiated coverage of Kumpulan Powernet Bhd (KPower) at RM3.40 with a ‘buy’ call and fair value of RM4.16, at a discount to an average forward 20 times price-to-earnings (PE) of leading renewable energy players globally to reflect the group as a new player and its relatively small market value.

On the flip side from a relatively low base, AmInvestment's Jeremia Yap said the growth potential of the group’s earnings is tremendous at 145.1% and 43.7% in financial year ending June 30, 2021 forecast (FY21F) and FY22F respectively based on his projections.

The research house is forecasting KPower’s core net profit to climb to RM31.3 million with a revenue of RM481.9 million in FY21 and core net profit of RM45 million with a revenue of RM691.9 million in FY22.

“Following a corporate exercise in June 2019 that ushered in new shareholders, management team and business direction, KPower has transformed itself into a builder of green utilities, with its primary focus on the provision of engineering, procurement, construction and commissioning (EPCC) and project management for renewable energy power plants including hydro, solar etc. in Southeast Asia, Central Asia, Europe and the Middle East,” said Yap in a research note today.

According to Yap, the investment merits of KPower include the bright prospects of renewable energy as well as the group being set to ride the green wave by virtue of its RM1.2 billion order backlog on green utility projects coupled with a tender book of RM3.2 billion.

This is also followed by a strong contender for engineering, procurement, construction and commissioning (EPCC) packages under the one gigawatt fourth cycle of the large scale solar (LSS4) project, a brain child of the Ministry of Energy and Natural Resources.

“At about 12x forward earnings, we believe this homegrown renewable energy player has a compelling investment case given its involvement in the sector at the right time,” said Yap.

At the time of writing, shares in Kumpulan Powernet rose 12 sen or 3.53% to RM3.52, bringing the market capitalisation to RM398.05 million.